Executive Briefings

Hidden Benefits of Accurate Inventory Control

The importance of inventory accuracy needs to extend past the stockroom walls, according to Debra Hansford, president of PreCrest LLC, a consulting and training firm. Inventory accuracy is a common theme at many companies, she says, with familiar topics including calculating accuracy, starting or improving a cycle count program, and debating the feasibility of conducting cycle counting rather than an annual physical inventory. While other benefits to inventory accuracy may be discussed less often, they should be considered as well, as they may well fall into the "hidden and overlooked" category, she says.
The idea of delivering parts directly to the point-of-use area may be gaining momentum and reducing the safety net of a secured stockroom with limited access, she says. Regardless of inventory location, maintaining accurate inventory records is imperative. Without increasing costs, methods should be implemented so that transactions are recorded correctly and on time to ensure the inventory balance is accurate and as close to real time as possible. She offers the following "musts" for achieving accurate inventory benefits:

Available Parts
When production begins, companies need to be sure that all needed parts are available. For those facilities with longer manufacturing lead times, raw materials and components may be in- transit or in-process with the expected delivery date corresponding with the planned production requirement date. Facilities with longer manufacturing lead times face a greater need for accurate inventory; not only is on-hand information critical, but on-order information from suppliers and production areas is critical as well.
Lean manufacturing principles, coupled with stock located at point-of-use locations and manufacturing lead times of more than one day encourage companies to begin the manufacturing process before all material is ready for use in the facility. Combined, these elements contribute to the complexity of managing inventory. Inventory accuracy must be dependable to ensure efficient operations.

Inaccurate Inventory
When inventory levels are inaccurate, even the best plans may be challenged. Once started, manufacturing orders may halt when parts are unavailable. In assembly plants, subassemblies may be built only partially while waiting for those last parts to arrive, which leads to the following.
Subassemblies in typically unexposed areas may get dirty.
Incomplete subassemblies are moved to another area--waiting for remaining materials--and therefore require additional floor space.
Control becomes more complex--to track and cost the incomplete subassemblies, as well as track the various materials needed for specific subassemblies.
Specialized labor may be required to understand the status of incomplete subassemblies and confirm and install the materials when they arrive.

Company Goal
Another reason that high inventory accuracy should be a goal of everyone in he company is because it may affect customers. Hansford advises businesses to take another look at at the less obvious potential benefits of inventory accuracy. "You may be surprised how improved accuracy levels help more than the stockroom personnel find parts for production or customer orders," she says.
http://www.apics.org

The importance of inventory accuracy needs to extend past the stockroom walls, according to Debra Hansford, president of PreCrest LLC, a consulting and training firm. Inventory accuracy is a common theme at many companies, she says, with familiar topics including calculating accuracy, starting or improving a cycle count program, and debating the feasibility of conducting cycle counting rather than an annual physical inventory. While other benefits to inventory accuracy may be discussed less often, they should be considered as well, as they may well fall into the "hidden and overlooked" category, she says.
The idea of delivering parts directly to the point-of-use area may be gaining momentum and reducing the safety net of a secured stockroom with limited access, she says. Regardless of inventory location, maintaining accurate inventory records is imperative. Without increasing costs, methods should be implemented so that transactions are recorded correctly and on time to ensure the inventory balance is accurate and as close to real time as possible. She offers the following "musts" for achieving accurate inventory benefits:

Available Parts
When production begins, companies need to be sure that all needed parts are available. For those facilities with longer manufacturing lead times, raw materials and components may be in- transit or in-process with the expected delivery date corresponding with the planned production requirement date. Facilities with longer manufacturing lead times face a greater need for accurate inventory; not only is on-hand information critical, but on-order information from suppliers and production areas is critical as well.
Lean manufacturing principles, coupled with stock located at point-of-use locations and manufacturing lead times of more than one day encourage companies to begin the manufacturing process before all material is ready for use in the facility. Combined, these elements contribute to the complexity of managing inventory. Inventory accuracy must be dependable to ensure efficient operations.

Inaccurate Inventory
When inventory levels are inaccurate, even the best plans may be challenged. Once started, manufacturing orders may halt when parts are unavailable. In assembly plants, subassemblies may be built only partially while waiting for those last parts to arrive, which leads to the following.
Subassemblies in typically unexposed areas may get dirty.
Incomplete subassemblies are moved to another area--waiting for remaining materials--and therefore require additional floor space.
Control becomes more complex--to track and cost the incomplete subassemblies, as well as track the various materials needed for specific subassemblies.
Specialized labor may be required to understand the status of incomplete subassemblies and confirm and install the materials when they arrive.

Company Goal
Another reason that high inventory accuracy should be a goal of everyone in he company is because it may affect customers. Hansford advises businesses to take another look at at the less obvious potential benefits of inventory accuracy. "You may be surprised how improved accuracy levels help more than the stockroom personnel find parts for production or customer orders," she says.
http://www.apics.org