Disruptions have not stopped. China has been flying balloons over Taiwan. North Korea is threatening South Korea. Russia continues its war with Ukraine. Israel is at war with Hamas which has spread throughout the region, diverting container ships from the Suez Canal in addition to causing a bunch of other negative consequences. The Panama Canal is experiencing a drought and has reduced the number of container ships that can pass. It got so bad that tankers are now avoiding it altogether which has improved pricing to jump to the head of the line for container ships.

And this is before we bring up one of the hottest topics for companies – the skills gap. In essence, although the high level numbers have improved a bit, if you talk with executives, they are challenged to find resources with the appropriate skill sets. Only the companies advancing technology will thrive; however, it requires additional resources with technical skills to pursue these avenues. It is a complete jumble. If a client thinks they have the resources, it turns out they don’t know what the executives expect them to know. Or, as conditions change (new ERP system, new company ownership, changing economic conditions), they fall short. To read more about where the talent has gone and strategies for success, read our blog article.

Why The Issues All Fall to Planning

At multiple clients, the issues are stockpiling in Planning. We consider Planning to include the following areas:

• Demand planning
• Production planning & scheduling
• Replenishment planning (transfers, distribution)
• Materials planning
• Logistics planning (warehouse, transportation, international)

Here are the common causes that are flowing into the Planning Teams. Executives are frustrated and often think the people are the issue when it is the process, the system, the way the organization is set up etc.

• Customer Service: If Customer Service doesn’t proactively manage customer requests, push back when appropriate, handle customer concerns proactively, enter sales orders with the appropriate fields filled in correctly, every issue will fall in Planning’s lap. As Planning plans and schedules, these issues will arise, and they will have to reschedule, expedite, etc. Additionally, as customers change their mind or orders are pushed out or in, if Customer Service isn’t on top of these issues and proactively communicating cross-functionally, the issues flow to Planning’s desk.
• Engineering: In CTO (configure-to-order) and ETO (engineer-to-order) companies, the product is not finalized until it goes through Engineering. If delays or mistakes occur during this process, the issues flow into Planning’s lap. Also, typically if customer approvals are required, the follow up falls to Engineering. If the customer is delayed in providing approval, they typically still want it on the original request date, even if the company has a policy against this occurring. It happens anyway and falls to Planning to resolve.
• Transactions: If the warehouse doesn’t ship, receive, and transfer on a timely and accurate basis, if production doesn’t enter production and issue materials on a timely and accurate basis, if whoever is responsible for scrap and usage adjustments don’t handle them on a timely and accurate basis, if the inventory team doesn’t cycle count, research and resolve root causes on a timely and accurate basis, the issues pile up in Planning. To determine what to plan, inventory must be accurate and performed on a timely basis. Another issue that arises related to transactions are design decisions made on the basis of minimizing transactions in one department that pushes the workload to Planning. Unfortunately, the fact that the workload will end up in Planning isn’t typically known, but it is what happens as someone needs to figure out what to do. If you don’t track at a detailed level yet you need to plan at a detailed level, Planning will have to figure it out manually.
• Suppliers: If suppliers struggle or transportation is delayed (such as the Suez and Panama Canal or via strikes), production must be rescheduled. Again, the issues wind up in Planning to resolve before moving on.
• ERP setup and use challenges: There are millions of setups and processes tied to how an ERP system is rolled out or upgraded. Thus, there are many ways the system can drive incorrect actions. For example, if an item is set up to flow through MRP when it should flow through a min-max planning process or vice-versa, the planner will not receive the appropriate signals. If your branches are not set up properly and in conjunction with your sales forecast, you can send the wrong product to the wrong place at the wrong time. If lead times and safety stocks are not monitored, you can run the plant out of materials or create an overage quite easily. If there are ECNs (engineering change notices) but the ERP system cannot handle them, the Planners might be left updating countless work orders to know what to produce and order.

In the last six months, we’ve seen Planning get bombarded with these types of issues across multiple clients in multiple industries and multiple geographies. It is a common situation.

Path Forward: Reactive to Proactive

Unfortunately, there are no easy solutions. In fact, that is how “we” have got into this situation. Someone has to figure out the path forward. If no one else does it and the ERP system hasn’t been designed to handle it yet, Planning will be your last resort. Thus, ensure you have the appropriate skills on your Planning teams. If they are supposed to catch whatever goes wrong throughout the lifecycle of an order, make sure your planners are ready to do that for an interim period of time. Have you provided ongoing training and education? Have you hired consultants to help your team upgrade the process? Have you invested in additional technology to support your team?

Look around you. Have you had several retirements of long-term employees? Are you sure someone has absorbed ALL of the relevant tasks? How sure are you that the tasks will be automated? How sure are you that they are no longer required if you’ve implemented a process change? How sure are you that your new resources understand the big picture? In several situations, smart executives wondered why these tasks couldn’t be automated. Of course, the answer is that they can be automated, but ONLY with a high-skilled resource(s) with practical experience that can ensure items don’t fall through the cracks. Don’t wait for retirements to occur to go backwards and think about the process. Plan ahead, develop career paths, and transition plans.

Have you implemented a new ERP system or new ERP functionality? Most likely, the ERP team said we will start with base information and add your requests to future phases. How sure are you that those requests will be covered in the interim period? Have you planned to bring on board the appropriate resources for the workload in the interim? Do your employees know what should be done? They might just know what doesn’t seem right, but not know what to do to make it better. Are there a few of those items that should be fought for instead of postponing to a future phase? If you don’t want your business waiting on the Planning Team, re-review if you hear any of these watch-outs. Supplement your team, provide support, and tie rewards with the outcomes you want to achieve for not just the ERP team, but also for those required to ensure success.

Pivot from reactive to proactive is the message. Think forward, invest wisely, provide training and education to your people, communicate clearly, hire leaders with the experience to “jump in” and take on tasks to “see” what their team members are experiencing and help their team climb out of holes. We are in a business environment that is not for the faint of heart. Strong leaders that are willing to take on smart risks, work hard, and pivot with changing conditions will deliver strong results.

SIOP: Reactive to Proactive

Smart leaders are rolling out a SIOP (Sales Inventory Operations Planning) process to proactively plan demand and supply. SIOP will alert you to bottlenecks, issues, the need to pivot etc. Forward-thinking companies are gaining an advantage as they have planned ahead to be agile, pivot quickly, and most importantly, are ahead of the curve in securing capacity, materials, and key resources.

Think ahead and pay close attention to what’s going on in your Planning Team. If the ball is rolling downhill, put stopgaps in place to catch it while proactively addressing the topic.

If you are interested in reading more on this topic:
Master Planning & Production Scheduling Case Study: Gaining Visibility for Results

The post Why Planning Is Impacted As Disruptions Abound appeared first on LMA-Consulting Group, a supply chain consulting firm.

Why Is Inventory Accuracy Foundational to Success?

Inventory accuracy is foundational to success. Most clients aren’t concerned about inventory, and they shouldn’t be if they can count on what their system says. However, in every case, inventory must be maintained to ensure your foundation is strong and will support customer service, revenue growth, operational efficiency, and cash flow goals. It is also foundational for maintaining financial records and a foundational requirement for Sarbanes Oxley.

For example, a security products manufacturing client called with concerns about decreasing profits. They were concerned that they couldn’t predict their costs and therefore their profit, and they thought it related to their use of the system. After performing an assessment of their people, processes and systems, it was clear that putting costs in their system didn’t make sense until they had a solid foundation to build upon. Inventory accuracy was one of those foundational elements that had to get in place before advanced layers of process and system capabilities were added. Fast-forward four months, and their inventory accuracy was intact, base product data was available, and they had gained control of their business and were better able to predict performance – and could advance from there.

Essential Inventory Accuracy Basics

Inventory accuracy boils down to a few simple concepts including:

• Process disciplines: The 80/20 of inventory accuracy success requires process disciplines to be implemented throughout your company. The tricky part of this equation is explaining the importance, establishing the connection points between processes, marrying the processes with the systems, and ensuring priorities are in place to complete processes and system transactions on a timely basis, in the correct sequence, and with the appropriate controls in place. Process disciplines cover from receiving and production to transfers (intercompany and intracompany) and shipments. In essence, any transaction that impacts inventory must be included.
• Use of the system: If process disciplines are intact, the only other root cause we’ve seen over a combined 100 years of manufacturing and distribution experience is the use of the system. Not all scenarios are created equal. For example, in several situations, intracompany transfers were an issue from an inventory standpoint. In a consumer products manufacturer, their system didn’t allow for tracking intransit properly, and so their inventory “disappeared” while intransit. In a building and construction products manufacturer, their system was highly capable, but the long-term processes didn’t account for transfers properly. Again, the result was “invisible” inventory.
• Root cause analysis: It is common to have inventory inaccuracies. No client has 100% inventory accuracy over the course of a year as perfection is cost prohibitive. On the other hand, many clients can maintain reasonable inventory accuracy with process disciplines and cycle counting. This suffices whereas only the best (around 20-30%) have substantial root cause analysis built into the culture and routines. If reasonable “works”, why strive for the best? They have fewer high skilled resources tied up in maintaining the foundation. Instead, these key resources are focused on profitable growth and advancing the business.

With these three essential inventory accuracy basics, a strong foundation is intact.

Maintaining Inventory Accuracy with Cycle Counting

The key to maintaining inventory accuracy is cycle counting. In essence, it is counting a subsection of your inventory on a daily basis to confirm your inventory accuracy foundation remains intact. Although there are many strategy options, common sense rules the day. ABC cycle counting means you count the material items (in terms of value, volume and/or customer impact) more frequently (that usually account for 20% of your items that equal 80% of your value) while counting the least material items (that usually account for 80% of your items that equal 20% of your value) less frequently. Instead of counting and adjusting, counting and adjusting in a vicious cycle, you focus attention on root cause analysis and resolution. Doing this for the “A” items will positively “B” and “C” items as well since the same process disciplines are required.

How Does a Physical Inventory Fit Into the Picture?

In most situations, once you implement a solid cycle counting process where you cycle through your full inventory at minimum on a yearly basis, you can provide evidence to Finance Auditors that your inventory will be “better” than performing a physical inventory. For example, if the people counting aren’t familiar with the units of measure and products, counting errors increase. Thus, many companies no longer require a full physical inventory. On the other hand, if inventory accuracy metrics start going off-track, it might be time to regroup with a physical inventory and a reimplementation of cycle counting.

The Bottom Line

You don’t want to be sitting happily and unwittingly in a house of cards. Thus, don’t have your house sit on a faulty foundation. Prioritize the appropriate resources to set up solid inventory accuracy processes and tracking mechanisms. If you aren’t in front of inventory variances and root causes, consider bringing on a supply chain consultant. You won’t need significant expertise long term for inventory accuracy alone, and so a short-term expert might fit that bill. Once intact, provide training and education, and make sure a regular review of metrics with Executives is a part of the process. It can be incorporated into the metrics slides of a SIOP (Sales Inventory Operations Planning), also known as S&OP, process to get a regular cadence with Executives.

Please contact us with your stories, issues, and ideas on inventory accuracy and cycle counting. And, please keep us in the loop of your situation and how we can help your organization upgrade your inventory accuracy processes to support profitable growth in addition to satisfying compliance objectives.

P.S. To get ahead of the curve on where to focus for the best results to build on your foundation to get ahead of the competition, download our complimentary report, and The Road Ahead: Business, Supply Chain & the World Order.

The post Why Is Inventory Accuracy Foundational to Success? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Volatility is the New Norm

If there is one thing that is certain in today’s world, it is that volatility and change are the new normal. VUCA (volatility, uncertainty, complexity, ambiguity) is top of mind for every client. For example, clients ask the following questions:

• What will happen next?
• Are we prepared?
• Which are the likeliest risks with the most severe consequences?
• Should we take the appropriate steps to mitigate if we don’t know what the future holds and if our business can withstand the investment?

Unfortunately, there is no playbook. Only the proactive, brave, and resilient will thrive,

How Does Inventory Relate to Volatility?

As it relates to inventory, the entire point of carrying inventory is to cover lead time, mitigate risk, and address volatility. For example, if you purchase from China, you have to cover the manufacturing and transportation lead time (typically 12 weeks minimum). You would want to mitigate risk. Unfortunately, with China, there are many potential risks (Chinese spy balloons, Taiwan-China tensions, Zero-COVID policy shutdowns, lack of natural resource supply (energy, water), shutdowns, transportation challenges in the South China sea, potential weather, strike and other conflicts in its journey to its destination, etc.). And last but not least, inventory covers volatility. If Sales sells different products than predicted, if suppliers extend lead times, or if disruptions occur, inventory allows your customers to be served while you address the volatility.

Thus, executives are perplexed as to what to do about inventory. In fact, they are in a quandary.

• Volatility is high: Since VUCA is at an all-time high, both demand and supply are volatile, and therefore out of alignment. Inventory covers that gap, and so more inventory is required to successfully serve customers. Beyond required inventory to cover volatility, clients have also moved from just-in-time (JIT) to just-in-case. Inventory is piling up! Of course, unfortunately, it is typically the wrong items in the wrong place at the wrong time if demand isn’t aligned with supply via a process like SIOP (Sales Inventory Operations Planning), also known as S&OP.
• Cost is up: The cost of inventory is going up with inflationary pressures. Every client has experienced raw material, component, and ingredient price increases. Additionally, every unit of inventory has to be stored and transported. Logistics costs have increased significantly as well. Even though the cost of the increases are slowing down, if you compare costs to pre-pandemic, they are up substantially. Thus, every unit of inventory costs more.
• Carrying cost: Having “too much” inventory ties up cash unnecessarily. You purchase materials, pay for production, and have storage and material handling costs all prior to getting paid. In addition, if you have to finance inventory, the cost has been skyrocketing with the increase in interest rates. Even if you don’t finance inventory, you are tying up cash that you cannot invest elsewhere. This carrying cost is also adding up to simply cover built in lead time. For example, 12 weeks of inventory is not only tied up unnecessarily but the cost to carry that inventory has gone up substantially with increased interest rates, increased warehouse space cost, etc.
• Inventory accuracy woes: Although a bedrock fundamental, the more inventory you have, the more likely you’ll be to have inventory issues. For example, as warehouses overflow into the aisles, inventory gets lost. As more locations are added, complexity increases (a key element of VUCA) and inventory inaccuracies increase. For example, a client expanded rapidly to meet increasing customer orders. To meet this increased growth, they expanded operations. Resources are limited, thereby creating complications in keeping up with transactions. Also, they moved the stockroom to a different location to accommodate for the expansion, thereby creating further volatility. Additionally, they needed additional materials and components to support production, requiring additional space. They also purchased long-term supply of critical components coming from the Russia-Ukraine region to secure supply, therefore needing additional storage locations. And, to increase production, they had to produce work-in-process when capacity was available, thereby increasing WIP inventory while waiting for parts and capacity to be available to complete the job. Since they are located in a rural area, they had to expand quickly with multiple available buildings/ locations. What I love is the descriptive names for these locations – the barn, the swamp, the subway, and more. Nevertheless, quick expansion with multiple physical locations can be quite the inventory accuracy challenge.

Executives are deciding among conflicting factors – customer service, customer growth, margins, and cash flow. It is not for the faint of heart. The trick is to turn this “or” equation into “and” so that you can achieve a win-win-win.

Go Back to Fundamentals

The great news about inventory is that the fundamentals “work”. As challenging as it is to navigate volatility, the key is to focus on the fundamentals. Best practice processes paired with process disciplines will carry the day. However, that will not be enough. To thrive in today’s business environment, processes will have to be accompanied with the appropriate technologies. For example, barcoding is greatly more efficient than writing on papers and data entry. However, garbage in, garbage out. Focus on process disciplines before you jump to automate a “mess”. And none of this will matter if you do not have the resources to support these practices.

Best Practice Processes

There are several inventory processes required to have the “right” inventory in the “right” place at the “right” time without having “too much” creating financial woes or “not enough” to support customers. Several of relevant fundamental processes include:

• Transaction disciplines: Every inventory movement (receiving, interfacility movements, work order issues, work order completion, operational steps, shipments, interbranch transfers, intercompany transfers, outsourcing operation steps, etc.) requires a best practice process accompanied with the appropriate use of ERP system functionality performed in the correct sequence and in a timely fashion. Most clients overlook the critical importance of these fundamentals. Although theoretically ‘easy’, it requires an orchestrated effort with trained resources who understand the impacts of their work.
• Cycle counting: Cycle counting is more than simply counting and adjusting. The key is to focus on root cause analysis and remain vigilant on process disciplines, cutoff times, and prioritizing what’s most important (ABC counting). The bottom line is that cycle counting will maintain your inventory accuracy so that when you go to produce, distribute, or ship, the inventory is where you expect it to be in the quantity expected. 
• Costing: Cost accountants are often underappreciated. Good ones can be your most valuable asset! When I was VP of Operations, understanding the true cost of inventory was a critical basic. Otherwise, how do you make “good” decisions? It was surprising how challenging it was to get a directionally correct cost for materials (including freight), labor, warehousing, freight, carrying cost, etc. It is important to properly utilize your ERP system to get a reasonable view of costs. Adding variances into the mix can confuse almost everyone in your organization. Stick with common sense. Strangely, cost reduction programs also cause havoc as 80% of clients double count at least some of the cost reduction programs accidentally. Bring on experts that can dig in and help you know where to focus. (Thank you to my mentor on this topic, Marty Ostrow!)
• Planning processes (demand, production, replenishment, materials, VMI, etc.): The best way to ensure the appropriate inventory is in the “right” place at the “right time” in the “right” quantities to support customer requirements while not having “too much” is to roll out best practice planning processes. These processes go hand-in-hand with ERP functionality including CRM, demand planning, MRP, advanced planning and scheduling, DRP, and more.
• SIOP (Sales Inventory Operations Planning), also known as S&OP: Aligning demand and supply is cornerstone to managing inventory. Refer to our eBook, SIOP Creating Predictable Revenue and EBITDA Growth to learn about how SIOP can help your organization and the secrets to implementing a process and cadence to ensure customer success and bottom-line results.
• Inventory metrics: Make sure to track the key metrics relevant to your business. A few of the key ones include inventory turns, days on hand (DOH), inventory variances, and inventory accuracy.

Final Thought

Inventory management is bedrock for any manufacturer, distributor, or retailer. Although solid inventory management is always vital in supporting growth, profitability and cash flow, it takes on even more importance during times of volatility, uncertainty, complexity and ambiguity. Both inventory accuracy and inventory levels will either propel success or become a bottleneck to success. Remember to dedicate key resources to this foundational building block.

Refer to our blog for many articles on inventory management and related concepts. Also, read more about these types of strategies in our eBooks including SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth. If you are interested in talking about implementing out best practices for inventory management to drive stability, customer service, growth and profitability, contact us.

Did you like this article?  Continue reading on this topic:
Are You Managing Inventory or Is Inventory Managing You?

The post Inventory Management: Go Back to the Basics for Success During Today’s Volatility appeared first on LMA-Consulting Group, a supply chain consulting firm.

Who cares about process disciplines? All executives say they care but few are willing to focus the efforts on instilling process disciplines. It seems like a less important topic than creating a new product, expanding into new markets or increasing margins; however, it is at the crux of success! No improvements can be made in inventory, service, efficiencies and the like without starting here.

When we see a client with excellent process disciplines, we typically see the following:

1. Clear understanding of roles and responsibilities
2. Clear understanding of the process steps and related system transactions that support the business.
3. Clear understanding of the timing, sequencing and interaction among process steps and functional departments.

We’ve seen some clients with books of process documentation yet very little success with process disciplines. Of course, having a documented process is a good idea; however, that alone will get you nowhere. Instead, think about and communicate the importance of process disciplines. Support the documentation of “what makes sense”. And results will follow.

After 11 years of consulting and 15 years before that in organizational life, I can communicate with absolute certainty that those who emphasize process disciplines will be more successful in growing the business and increasing margins than those who don’t. If you’d like to talk over how process disciplines could be strengthened in your business, contact us.

The post Who Cares About Process Disciplines? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Why do so many companies run into issues with inventory accuracy?  After working on hundreds of projects with companies spanning many industries such as aerospace, building products and food, I’ve found these pitfalls are the most common:

• Transaction timing issues – although they might perform system transactions, they are not completed on a timely basis. Thus, the system gets all mixed up – with the best case scenario.
• Transaction quantity issues – who hasn’t had fat fingers and keyed in 10000 instead of 1000? I’d be hard pressed to think of a client who hasn’t experienced that issue. In addition, there are transpositions of numbers, incorrect counts, etc.
• Transaction sequence – even if everything is perfect with the quantity and timing, there are countless problems with transactions being completed in the incorrect sequence. Unfortunately, systems are rarely forgiving with this issue. Typically, they would need to be backed out and start over.
• Transaction training – often, there isn’t a full understanding of how to perform the transactions. How to undo problem transactions is especially important but rarely understood.
• Count and adjust mentality – there are many companies that “count and adjust” to keep their inventory accurate. They miss the critical step of reconciliation and root cause analysis. Actually counting and adjusting can lead to even larger inventory issues because root causes are never getting addressed and the inventory gets worse and worse over time.
• Other inventory adjustments – other inventory adjustments often get in the way. For example, if we change one part number into a different part number and there isn’t a production entry for the transition, it is often done through an inventory adjustment. That can be fine; however, these inventory adjustments, timing and process needs to be understood and incorporated into the cycle counting process.
• Virtual warehouses – these can create havoc with inventory accuracy. They are often used for quality hold, to “save” product for customers etc.  Keeping track of transactions related to these is important and will have a profound impact on the rest of your inventory accuracy.

The post Inventory Accuracy Pitfalls appeared first on LMA-Consulting Group, a supply chain consulting firm.

I received a note recently from one of my newsletter subscribers asking if inventory management is dead.  He stated that he didn’t think there was a single session on inventory management at APICS 2015 and wondered if the topic was dead. The answer is NO….at least not for successful companies!

Interestingly, I was asked specifically to talk about inventory management by the APICS Ventura chapter as their programs chair said that their members were interested in fundamentals topics – what really matters to success in the workplace. That is the reason why inventory management will never go out of style – similarly to the fact that your house will not stand up long term without a solid foundation, your company will not stand up long term without solid inventory management practices.

Start with the base fundamentals. You must start with systems transactions – timing, accuracy and separation of duties are all important. I’ve been called into significant messes including failed system implementations that I’ve been able to resolve largely stemming from these types of foundational elements. It is well worth paying attention to them! Next look at inventory levels – optimize the level of inventory, your supply chain network structure, your lead times, customer service levels, efficiencies and margins.  The right mix will result in business success – and optimal inventory and cash flow levels. For more advanced topics, evaluate collaborating with customers, suppliers and other supply chain partners to take inventory management practices to a new level only achieved by looking at the end-to-end supply chain. If you’d like to discuss options to dramatically improving your inventory management practices, contact me.

The post Is Inventory Management Dead? appeared first on LMA-Consulting Group, a supply chain consulting firm.

As mundane as system transactions seem, I continually find that whether or not they are deemed a priority can make the difference between a successful operation or not. The bottom line is that my clients who make sure they design the optimal process, document the systems transaction steps and ensure the timely and accurate execution of transactions succeed.

If you think of it like building a house, system transactions are part of the foundation. If you have an unstable foundation, no matter how much money you put into your house, it will be unsteady. Unfortunately, I’ve seen this occur a few times. When growing up in Schaumburg, our house was built on an unstable foundation and began to sink. Thank goodness my Mom got the builder to help resolve the problem after much ado. The foundation had to be shored up to resolve the issue which was much harder/ costlier to resolve later than it would have been when building. On a lesser scale, the wood floor in my house had HUGE gaps a few months after moving back in (after it was rebuilt due to a fire). Several months later, it took taking the wood floor up and re-leveling the floor with cement and sanding it down to resolve.

Thus, make sure one of your key managers is responsible for transactions. They should not be an after thought. Instead, design or re-design transactions to optimally and most efficiently leverage the system to track appropriate data. I’ve worked with several clients to accomplish this task. In every case, inventory accuracy improved greatly. This contributed to improved customer service (as they could find what was needed to ship), reduced inventory levels and freed up cash (as they could count on what they had and so didn’t need to keep extra stock just in case), and improved efficiencies (as they could optimize their processes). Emphasize the importance of transaction timing and accuracy. Provide training and make sure priority is clear. For example, it is not enough to say transactions are a priority but de-prioritize if overtime is required to complete them.

The post Why Care About Systems Transactions? appeared first on LMA-Consulting Group, a supply chain consulting firm.

How many times have we heard this? Or, perhaps your inventory resource will keep looking until he/she finds it; however, it took them 3 times as long to pick product to ship or materials to supply the line? Perhaps the line shuts down…..not good! Unfortunately, in my experience with manufacturing and distribution companies over the last 25+ years, it happens every day. Logistics managers are constantly struggling to keep their inventory intact. The problem is that inventory accuracy is dependent on several factors spread across multiple functions:

• Transaction timing – it is not good enough to eventually (perhaps the end of the shift) “ship an order to the customer, enter production, transfer inventory, receive an RMA, address an item in quarantine and so on. Conceptually it is quite simple – the system transaction coincides in timing with the physical transaction. In reality, life gets in the way.
• Transaction accuracy – even the best of typists make mistakes. Is the work being checked? I can’t tell you how many times a transfer of 100 might end up as 1000. Certainly could cause an issue!
• Transaction understanding – even if you are accurate with typing, you might not understand the correct sequence of steps or the method to get the system to accept the transaction properly. This can lead to much confusion. The worst case scenario is that the system can get screwed up and require IT to fix it. The typical case is that the transaction accuracy is affected. Here’s a key question – do you know how to fix incorrect transactions? Think about how many of your resources know how to do this properly.
• Coordination of resources – it is rare that one person owns every transaction performed within an area. Actually that creates a new set of problems as any time the person is out, everything goes awry. Typically, there are multiple people shipping, entering production, transferring items, etc. Transactions can get duplicated or forgotten with the best of intentions without clear-cut coordination.
• Scrap/other adjustments – these create havoc for most of my clients more than anything else. Pay special attention to these.

It’s no wonder every organization struggles with transaction disciplines – and ultimately inventory accuracy. On the other hand, we’ve worked with dozens of clients on inventory accuracy and brought 50% – 60% (and unknown figures for untracked inventory accuracy levels) consistently to the high 90%’s. Suddenly, customer service improves, productivity increases, and profit even follows – nice reasons to think about the importance of inventory accuracy. If you’d like to talk further about your inventory accuracy struggles, please contact us.

The post I Can’t Find What I Need in My Warehouse! appeared first on LMA-Consulting Group, a supply chain consulting firm.

Processes are often overlooked in terms of their value. Everyone knows you should have them, document them and even follow them but few understand their power.

1. Process review – One of my most successful approaches in my consulting toolkit is process review. It is simply amazing how much can be learned by observing processes in action. Almost every time I review processes, low hanging fruit is uncovered.
2. Questioning – Asking the right questions at the right time is a key to uncovering process potential. It seems so obvious that it is frequently undervalued. Asking the whys associated with processes can yield substantial results.
3. Systems approach – A systems approach to processes is the only way to go. This doesn’t mean to be rigid and inflexible (as many think when bringing this topic up). Instead, it means to think and design your process in a systems-wide manner.
4. Documentation – Of course, don’t overlook documentation. There’s no need to get crazy but core processes should be documented. Make sure folks have the ability to reference documentation for key functions.
5. Simplify – I thought about using process improvement as the key point and decided that simplification is of upmost importance. Simplifying processes can be one of the most challenging pursuits but it’s well worth the effort – and is an improvement to boot.

The post The Significant Value of Processes appeared first on LMA-Consulting Group, a supply chain consulting firm.

The main goal of cycle counting is to cycle through your inventory to ensure inventory accuracy on a consistent basis. (In contrast, a physical inventory is a point-in-time process, typically yearly, to ensure inventory accuracy). The keys are as follows:

1. People: It is important to make sure the right resources have the right responsibilities. A counter requires a detail-orientation and should take counting seriously (it is amazing how much time and energy is saved with a cycle counter that understands the value of counting right the first time), whereas a reconciler requires an analytic ability with enough of a big picture understanding to make sense of the results and research.
2. Cycle count frequency – cycle counting must be performed on a consistent enough basis to provide assurance that the inventory is continually reviewed (and can be relied upon). Best practice processes typically count weekly – at minimum, monthly.
3. Cycle count calendar – the key is to make sure that you’ve cycled through your warehouse at least once a year and have covered 100% of your warehouse. Depending on your level of accuracy and impact on customer service, a more frequent basis might be required.
4. Cut-off processes: you might as well throw out all your work if everything moves while its being counted. It is critical to identify a process that works for your business where you freeze the inventory for a period of time and/or coordinate closely on all moving parts and cut-off’s.
5. Variance analysis: there is no reason to count if the majority of the emphasis isn’t on understanding your variance root causes and developing solutions. Don’t get bogged down in resolving every dollar – focus on the significant ones, and you’ll achieve the “80/20”. This is the key to an effective cycle counting program.

The post Cycle Counting appeared first on LMA-Consulting Group, a supply chain consulting firm.