Calling all CONTROL Freaks!
This blog is all about Stock Accuracy - one of those critical magical ingredients that will make or break all other associated processes.
Accurate Stocks = Trust + Less noise + Less unplanned work + Lower costs
Inaccurate Stocks = Over ordering + Squirrel stores + Expediting + Constant noise
If PM Planners and Schedulers cannot (or do not) trust the information what their ERP system is telling them regarding inventory quantities held within the warehouse, they will take appropriate (and even inappropriate) action. This equates to Free Text purchasing of materials that are stocked or reserving more materials then required and building 'squirrel stores' to ensure that they canplan their work and it will be able to be completed.
If I were a Planner/Scheduler I would do the same!
Stocktakes need to be viewed as a gap analysis that identifies the level of control that you have over your stock.
Let's get back to the Control Freaks, as MRO Warehouse Management is all about CONTROL.
You must demonstrate and prove to the business that you have control of the inventory within your warehouse. The only way to do this is through a high degree of material availability and that comes from counting, counting, and more counting. The counting is the easy bit, when differences are identified the real work begins because it is the beginning of an investigation to find out where the gap is in your processes.
Stocktakes need to be viewed as a gap analysis that identifies the level of control that you have over your stock.
Accurate stock levels are only one of the benefits of the stock count. The goal is to identify gaps and close them as quickly as you can.
This is why I have indicated that Stock Accuracy is one of my top five KPIs. It's core to all the processes that the Warehouse Team employ and for good reason. The results of the stock counts should be published and discussed across the business.
When differences are found it’s critical that you resist the temptation to simply adjust the stock to match the actual stock on hand. This happens at just about every warehouse that I've been to. This only hides the fact that bigger issues are present and destroying trust in the Warehouses ability to supply materials as promised.
Not accurately recording your inventory is like getting a parking ticket on a regular basis but you do nothing about it. You don’t change your behavior, you keep getting tickets, and then the next thing you know your car has been impounded along with a mountain of debt to pay before you get your car back.
Death by a thousand cuts!
Moving to a Cycle Counting Program
So, let’s get you back on track and begin counting.
Ideally you should move towards a cycle counting program so that you spend your time counting the materials that need your attention more often.
MRO Warehouse Teams tend to count materials by shelf or isle or wait and do larger counts where no time isprovided for investigations. Stocks are corrected but the root cause is never identified, and you keep getting parking tickets!
Cycle Counting is not hard to establish, but it will increase your labor needs. Despite this, it is core to any warehouse and should form part of your daily planned work. Daily counts are quick and simple to complete, and they (should) give you the time to investigate the materials that were incorrect.
Shown opposute is a good starting point. Most ERP systems have cycle counting built in.
- A Class Material – fast moving and critical materials that are counted monthly
- B Class Material – moderate moving materials that are counted quarterly
- C Class Material – slow moving materials that are counted twice per annum
- D Class Material – awfully slow moving non-critical materials are counted once per annum
The actual Stock Accuracy KPI is simple to calculate, and I like to report it based on quantity AND value. Quantity is based on the number of materials that were correct NOT the physical inventory quantities. Values catch the attention of people higher up the food chain. Shown opposite are the formulas.
Summary
Stock accuracy is absolutely core to Warehouse Operations. It should be the go-to process that you use to identify gaps within your warehouse operations that are leading to inaccurate stocks. Publish the result and discuss them with the various teams on site along with how you plan to address the gap. Everything can be improved!
Cheers,
Tim
