Inventory Control: Did I get it?

By Becky Ferrell

 

As the Materials Manager in the plant, you’re in charge of inventory. The plant runs – or doesn’t – depending on your ability to ensure the appropriate amount of inventory is on hand at all times for production. It SHOULD go without saying that keeping inventory on hand does NOT include spending money on premium transportation.

Annual Physical Inventory has shown parts ARE being lost in the plant…but where? Manufacturing says it’s due to a supplier and/or materials management issue. But your employees are alleging that manufacturing isn’t being forthright about their production losses or scrap.

 

So, how do you determine where the truth (and the inventory loss) lies?

Let’s apply a little Cowboy Logic here. When you’re herding cattle, you can fight them and chase them, or you can block off exits until they really have no choice other than to go the direction you want. In reality, some of the arguments you have at work can be resolved the same way. Rather than arguing, block off an exit (i.e., take away parts of the argument).

HVMC: Inventory Control using Cowboy Logic

 

How do you apply this?

Well, in this case, let’s start by ensuring the supplier receipts are accurate. Implementing a “Receiving Test Check (RTC) Procedure” will validate suppliers are actually shipping what is on their documents.

 

How does it work?

Thanks for asking! If you haven’t already done so, classify your parts into A – B – C buckets, based on cost. These classifications will determine how often you will perform a RTC. If you haven’t done so already but decide to implement Cycle Counts, these same classifications will be used. Based on the classification, set a frequency for RTC for each part/supplier combination.

The process is relatively simple. When a shipment for that part/supplier arrives…

  1. remove one container from the shipment,
  2. physically count the material in that container, and
  3. match the count against the paperwork and part label.

Record all required information for the RTC so you can demonstrate ongoing compliance to the procedure. Variation in counts should be communicated immediately to the supplier, along with updating the receiving paperwork (transaction). Up-front notification of the new procedure to Purchasing and the supply base is a courtesy call.

 

*Pro Tip.

One gem I learned when working overseas was to take containers from different locations on the pallet. Why? Since the audit is done as parts arrive, truck drivers often watched the process and reported this back to the suppliers. Generally, for ease in accessing the parts, a box on the top layer of the pallet was counted. Once suppliers learned containers were being opened and counted, they ensured the top layer counts were accurate. However, when shortages continued to be noted later in the process, the RTC was updated to access various points in the pallet, including the bottom layer. A few phone calls and debits later, the suppliers to shored up their processes and ensured their counts were accurate in all containers!

 

OK, so you’ve taken on this additional work, what does this do for you?

Two things…

First, it ensures supplier counts are correct and the receipts in your system are accurate.  I’ll warn you in advance, you’ll find some suppliers who are over-shipping, especially small parts!

Second, it “closes the gate” on the argument that losses are associated with not receiving material. This argument simply dissolves in the face of objective data!

 

Now, what do you do with the hypothesis that manufacturing may be under-reporting losses?

Well, you’ll have to come back and read next month’s blog to see how THAT gate got closed!

 

Need some assistance in creating strong Inventory Control procedures?  HVM associates have experience in diagnosing inventory issues, crafting solid Inventory Control processes, and implementing these processes to ensure your plant’s records are accurate and inventory levels appropriate. Give us a call!