St. Onge Company Links Supply Chain Blog
Strengthening your supply chain one link at a time.
 

Improving Inventory Control – Let me Count the Ways

Inventory control regulates the inventory already in a distribution center. In other words, inventory control is responsible for preserving the accuracy achieved during the receiving process.

Accuracy must begin with receiving. We should not rely on inventory control to compensate for a lack of accuracy within the receiving process. Please see my prior blog post to understand why receiving may be the most important process within your facility (and how to construct a receiving process that will inherently minimize errors).

Inventory accuracy is fundamental to your ability to service customers. Inaccurate inventory can be costly, causing such issues as:

  • Excess safety stock (due to lack of confidence in accuracy)
  • Delays in order fulfillment (due to lost or misplaced product)
  • Costs associated with placing and managing backorders
  • Lower labor productivity associated with searching for lost product
  • Potentially higher freight costs (expediting shipments)
  • Business interruption and labor costs conducting a “full physical” inventory (effort to find and fix errors versus integrating controls into operating methods to avoid errors)

The good news is that there are many ways to improve your ability to control inventory. I will highlight five:

  1. Cycle Counting

Implementing a cycle count program is one of the most common inventory control techniques. This approach spreads the inventory audit throughout the year using an ABCD ranking. For example, counting A items weekly, B items monthly, C items quarterly, and D items annually. The Pareto method of stratifying your effort does well in balancing the cost of controlling inventory with the ability to meet your customers’ needs.

When determining your cycle count ranking, do not rely on ABCD velocity ranking performed as part of your warehouse slotting analysis. Cycle count ranking should consider “value” drivers and “service” drivers, not necessarily just “volume” drivers (like pick frequency).

  1. Event-Driven Inventory Control

A robust warehouse management system (WMS) will leverage event-driven controls within both put-away and picking to help you detect and proactively correct inventory variances.

Within put-away, there may be an issue with the location to which the WMS has directed a teammate. A best-in-class WMS will not only assist the teammate in redirecting the put-away to a different location, but we can configure the WMS to capture a reason code for the put-away override. Conditional to the reason code specified by the teammate, the WMS will automatically generate an inventory count task for the location involved.

When performing a pick transaction, if the full quantity can not be fulfilled from the location as expected, the WMS should auto-generate an inventory count task for the location involved.

  1. “Free” Inventory Counts

By integrating counting into picking, there are opportunities to perform a “free” inventory validation. If a location becomes logically empty as the result of confirming a pick transaction, the WMS should provide the option to prompt the operator to confirm the location is physically empty.

If the operator indicates the location is not empty, the WMS should automatically schedule an inventory count task for that location. Until the inventory count is completed, the WMS should not update the location as empty; it should continue associating the original item with that location. These attributes will help prevent put-away (or other inventory movement) from targeting the location as empty.

  1. Counting “Low” Inventory Levels

A properly slotted (and replenished) picking location is rarely empty. Therefore, primary pick locations have limited opportunity to perform a “free” count (described above). However, the WMS should allow the option to integrate an inventory count as part of the picking process when the inventory level reaches a “low” level. The intention being that the interruption to the picker would be minimal if the number of units to count were low.

Similar to the other exceptions described above, the WMS should automatically create an inventory count task if the operator indicates the actual quantity picked is not equal to the expected quantity.

  1. Automatic Prioritization

Inventory count tasks created as the result of an exception should be prioritized higher than tasks created through the usual cycle count schedule. This automatic prioritization is similar to the WMS functionality I described in a prior post, which improves your ability to manage replenishments. Alternatively, the WMS may provide an option to discretely access each type of count (event-driven task versus general cycle count), allowing the assignment of appropriate staff to each category.

 

— Kail Plankey, St. Onge Company
 
 

Enter your email to subscribe to "Links":