“We’ve got far too much stock, too much cash tied up, yet we’re always running out and we can’t trust the computer stock figures!”
When times are tough you can’t tolerate poor stock control any longer and you need to take action.
Here’s what to do:
Get to grips with the data. Look at your usage rates and calculate how many days, weeks or months’ worth of stock you have of each item. Sort the items in order. Where you have low stocks, check your stock figures and ensure you’ve got supplies lined up – these might be next week’s shortages! Where you have high stocks, are these slow-moving or obsolete items? If so, identify them, segregate them, count them, seal them and work out how to dispose of them (re-use, re-work, send back to supplier, sell off, scrap, etc).
Implement a system of Cycle Counting (also known as Perpetual Inventory or PI). Rank the items by Usage Value (Usage x Cost) and categorise the Top 10% as A items, the next 20% as B items and the remaining 70% as C items. Count the A items most frequently (say every month), the B items less often (say every three months) and the C items the least often (say once every year). Each week count the required number of A, B and C items. Compare the actual count for each item with the stock record and identify as “misses” any items where the variance is outside a reasonable counting tolerance. Those that are within tolerance are “Hits”. Calculate your Inventory Record Accuracy (IRA) by dividing the number of line items that are Hits by the total number of line items counted, and multiply by 100%. Investigate the root causes of any errors, put in place preventive actions and improvements and watch your stock accuracy improve (aim for 98%+). Over time you’ll achieve what you thought was impossible – accurate stcok figures you can trust, lower stock levels, less cash tied up, and fewer shortages!
For practical help in getting your stock under control contact Andrew Nicholson at www.ImproveMyFactory.com