Inventory Control: Where did it go?

By Becky Ferrell

 

Last month, we discussed Inventory Control and a method to ensure your plant is validating the quantities being sent in by your suppliers.  Using some Cowboy Logic, the implementation of the Receiving Test Check process effectively “closed the gate” (and ended the argument) on claims that material losses were the result of not receiving the correct amount of product.

Before we address your employees’ hypotheses regarding manufacturing losses, let’s talk about other gates that have been closed in your favor.  Or…that should be….

 

HVMC Inventory Control, Cowboy Logic

 

Bill of Materials & Manufacturing Compliance

Based on data from your MRP system, you know what material, right down to the part numbers and quantities, have been used in products that were built and shipped.  The caveat here is this data is based on the Bill of Material for those products. Do you see the elephant in the room?! … Are your BOMs correct? Do you have a process to not only validate the BOM, but also manufacturing compliance to them?  If not, this is a “gate” that needs to be closed, and kept that way!

So, at this point we have the “gates closed” for accuracy of receipts and usage as defined by production counts / shipments made.  Let’s now turn to what your employees are saying.

 

Scrap & Validated Data

How do you validate manufacturing is reporting ALL of their scrap?  Sure, you have a scrap process, but is manufacturing compliant to that process?  There are several methods to validate this, including performing regular audits of scrap containers through physical counts, weights, etc.  And these methods SHOULD be part of your daily activities managing the handling of scrap.

But, you say, I have operations within my plant where scrap can be hidden.  Such as…… melting operations located where you’re also machining cast parts?  Ok, so I make some of my own castings, but purchase others…. Good.  I can prove how many purchased castings come in, how many are finished and shipped, how many are on hand, and how many are rejected and scrapped or returned.

But, there’s STILL a difference in physical versus book inventory. Where did they go? In the case of the castings we were discussing, the probable cause could be they were melted but not reported. Do you see the power of having the data? Having all these validated data points is making the path ahead very clear.

 

Hide & Seek: After Hours

Are there other places to hide or dispose of parts that should be recorded as scrap, but are not?  Of course!

In one plant, the numbers still didn’t add up.  We implemented Receiving Test Checks, BOM reviews, scrap audits.  We knew what was being shipped and what was in Finished Goods / Work-In-Process.  But we were still off. Enough off that the Production Manager was threatening to charge shortages to my budget. But having closed all the other “gates”, there was one more place to look….

On a Friday night after production, my material drivers cleared my receiving dock of all materials. They then pulled all trash containers from manufacturing areas to the dock and…dumped them. As the trash was gingerly separated, we found a treasure trove of productive AND indirect materials, which had obviously NOT been reported.  After labeling the source department for each trash container and taking photos, we shut down for the night.

 

Back to Production, Trash Patrol

The next morning only some critical operations were scheduled to run. At start up, I invited the Production Manager to walk down to the dock where he was greeted by piles of trash and my crew.  I explained to him the process we had followed. I also informed him based on the findings, my team would be periodically repeating the activity until such time as no parts were found in the trash.

And, oh yeah, until repeated audits found zero “trashed parts,” I’d also be adjusting his scrap counts to reflect any book inventory losses associated with each part found.  He turned and silently walked off the dock.

And the cowboy watched the last cow go through the desired gate and closed it.

 

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!