Does your company need to improve inventory accuracy? Often, writings on inventory accuracy improvement focus on techniques, such as cycle counting. While this is a very important item in the toolkit of the inventory or materials professional, cycle counting is only mainly a measurement and diagnostic tool. Think of it as SPC (Statistical Process Control) for inventory accuracy.

Does your company need to improve inventory accuracy? Often, writings on inventory accuracy improvement focus on techniques, such as cycle counting. While this is a very important item in the toolkit of the inventory or materials professional, cycle counting is only mainly a measurement and diagnostic tool. Think of it as SPC (Statistical Process Control) for inventory accuracy. You probably aren't going to cycle count your way to inventory accuracy, without also making major improvements in the material handling, transaction control, reporting and feedback process. For many companies, using cycle count adjustments to correct inventory record errors is like trying to bail out the ocean with a spoon, since errors may be made far faster than they can be economically corrected. So what should you do? An effective inventory accuracy program should consist of the following elements: • Inventory accuracy measurement criteria (metrics)- including item/part number identification, quantity and unit of measure, location and posting timeliness. Some companies also measure other related data, such as customer/contract number, configuration/revision letter, lot, serial number, grade and expiration date. I have visited companies claiming to have 95,98 or 99+% record accuracy that quickly shrinks to mid-double digits when we apply our uncompromising criteria objectively. Sometimes companies have invalid criteria, sometimes they deceive themselves, sometimes their employees deceive them, sometimes unconsciously or unwittingly. • A clearly defined material and document flow, with control and tracking points identified. These should be clearly marked out in the shop and employees should be thoroughly indoctrinated. A simple flow chart of the desired system is an excellent educational tool. It should include material, document and transaction routing, "drop points," flow times, logging, batch controls, reports and auditing. • Adequate facilities, space, storage and material handling systems and other equipment. Good housekeeping practices are a must. It might be necessary to physically secure the inventory with fences, gates and locks, if floor discipline cannot be achieved otherwise. Make sure that there is a place for everything- materials, equipment, documents, and of course, people. Use signs and markings to make these obvious. • Effective policies and procedures for material handling, storage, identification, packaging, labeling, data collection, counting and transactions. Use good forms and tools to structure work properly. • Effective inventory transaction cut-off control and reconciliation procedures, including accounting for all transaction documents. Don't dare even THINK about real cycle counting until you get control of this, although it is recommended that you start early with a small control group, to debug the process and begin error diagnostics. Expand to a larger cycle count program only after you know what you're doing. • Transaction control system to post transactions and provide inventory status to all departments needing it, preferably via an on-line computer system. Bar code and other automated data collection systems are desirable, if cost-effective, but are no means mandatory to run an accurate system. Visual control systems can sometimes reduce or even eliminate the need for most transactions and automated systems, in the proper circumstances. So, you maybe thinking, all of this is fairly straightforward—why isn't everyone doing something like this successfully? It's actually much harder than it looks—why: • Attitude: Not everyone agrees that inventory accuracy is important. I say: Are you satisfied with the alternative? It requires a high degree of consensus on the approach, responsibilities and "ownership." In extreme cases, company executive leadership may need to step in to help change the culture and oversee required changes. • Discipline is needed, day after day, year after year. This is not a one time cleanup job that management can declare victory for and just go home. It requires that someone be at least a part time to keep the effort focused and permanently active.

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martin