Achieving good inventory management requires reliable accurate up to date data.
If there are problems with data accuracy, check to see that your inventory system (or ERP system) is being used as it is designed to be used. If you try to shortcut data entry processes because the methods described in the user manual are too cumbersome then you can expect major problems. Under these circumstance, instead of taking shortcuts, you should look at what can be done to speed up the process. For example, suppose that transferring stock from one store to another requires two transactions. Find out if some programming can be done to enable the transfer to be done with a single transaction. That programming could, for example, create the two transactions required from a single transaction.
Potential Problem Areas
Replenishment of stock of each item requires accurate records of stock on hand, the quantity on supplier order, the quantity on customer backorder, demand history and, to a lesser extent, unit costs.
If transactions are processed with incorrect units of measure then major data inaccuracies can be expected for the items concerned. It is necessary to be particularly vigilant in this regard. I encountered a situation in which there was confusion between metres and millimetres. Needless to say, there were problems in relation to the items concerned.
Incorrect processing of inter-store transfers will cause inventory management problems.
Stock on Hand Data
This is something which is corrected routinely by stocktakes.
If stocktaking reveals a lot of substantial variances (differences between counts and computer records) then the reason for the problem should be investigated. Under these circumstances, stocktaking will fix the computer stock on hand records but only temporarily. The causes of the inaccurate stock on hand data are also likely to have caused inaccuracies in other computer records. These problems will continue if they are not investigated and rectified.
A later article will describe cost-effective stocktaking methods.
Quantities on Supplier Order
Incorrect data concerning what is on order from suppliers tends to be a much more serious problem than incorrect stock on hand data. That is partly because the quantities involved tend to be much larger.
For that reason, it is important to ensure that your computer records of what is on order are consistent with the suppliers’ records. When an order is placed on a supplier, ensure that you receive confirmation. It is desirable to check that confirmation against your own records. That process should be automated if that can reasonably be done. If, for any reason, the supplier has no record of the order then, not only will you fail to receive the goods, your records of supplier orders will suppress further ordering until the problem is rectified. As a result, there will be serious shortages. For the same reason, it is important to follow up overdue orders promptly. Not only will that serve to check that the supplier’s records of your orders are still correct, you will find out if expediting is required.
If you get the computer to produce a recommended order and don’t go ahead with it then it must be deleted from your system immediately. I have seen a company’s overall service level plummet as a result of failure to delete a tentative order which was not sent to the supplier.
If records of these are inaccurate then both replenishment and customer service can be affected for the items concerned.
Problems with this can adversely affect replenishment. They can be caused by incorrect transaction processing, especially in relation to inter-store transfers. These must be processed in accordance with the instructions in the user manual for the inventory system. Don’t be tempted to take shortcuts in this regard.
Good inventory management requires reliable up to date data. The data used for replenishment needs to be kept reliable with appropriate regular reconciliations.
Please feel free to contact me if you need any assistance in relation to improving data accuracy.