The FULFILLMENT DOCTOR Pays a House Call… to Diagnose Inventory Accuracy Issues

May 09, 2007 8:31 PM  By

Q: If you were asked to choose the one operational area in the distribution center that could generate the greatest improvement in performance, which would it be?

A: Two words: inventory accuracy. I believe managing inventory accuracy is the greatest single contributor to improving performance and customer service and reducing cost.

Consider all the potential rework you could eliminate if your inventory were accurate: Product would be available to fulfill orders on demand; orders would be completed in one pass and not rehandled; you wouldn’t have to waste labor tracing product movement history and searching for lost product within the DC; packing and shipping personnel could work at a more consistent pace without delay.

Most inventory management problems are reactive rather than proactive. Proactive inventory management that results in accuracy levels greater than 99.75 % have two key process requirements and a host of support processes.

Key requirement number one: Assure the product is correctly identified and correctly received on the inbound dock. This requires both vendor and DC participation. In the DC, associates holding the critical position of receiver are the first level of proactive inventory management. They need to be part dictator and part accountant. Receivers must be enabled to correctly identify to the minutest detail all pertinent SKU, quantity, and description information. I believe this job should carry a premium hourly rate, perhaps the highest in the DC. To retain the position, a receiver should not make more than two errors in a rolling six-month period; if he does, he should be removed from the job.

Key requirement number two: Perform aisle mapping or location auditing daily. Everyone says, “We do that, and we still have problems,” but if you just follow this prescription, your problems will begin to disappear. Develop a report enabling the printing of one side of an aisle in location sequence (or in RF technology the downloading) to a handheld. Identify for each location the SKU number and the description, pack, size, and color that is called for in the inventory. The quantity in the location is optional. The basis of the solution is to verify that the correct item is in the location called for.

Work through half of an aisle at a time so that the process is manageable and you can make timely corrections to discrepancies. Identify conscientious, detail-oriented associates (the number will depend on the size of the DC) and have them begin mapping the first aisle of reserve product and follow it through the last aisle, completing the cycle in two weeks. Then begin all over again. You should perform the same sort of mapping in pick locations.

Support processes: It is important to place responsibility for inventory management with the strongest manager on your team to ensure consistency of application and accuracy of detail. Applying cycle-counting programs is beneficial when that application is based on A/B/C volume analysis and counts every identified location of an SKU. RF technology using barcodes at every possible application is an excellent counting method, including but not limited to SKU identification, verification of the put-away location, tracking product location throughout the facility, pick verification, and pack verification. Directed put-away as part of a warehouse management system helps to clear up many blemishes. I recommend a daily condition report indicating all inventory adjustments by SKU, plus or minus, units, dollars, reason, and who made the adjustment. I also like to see total weekly adjustments as a percentage of total inventory expressed as both units and dollars and graphed to identify trends.

Q: But why is inventory management the most important source for generating operational improvement?

A: Because implementing inventory management removes the most prevalent crutch for poor performance by holding all other DC employees to specific standards.

Gary Conrad is vice president for F. Curtis Barry & Co. (www.fcbco.com), a Richmond, VA-based operations consultancy.

Related articles:
Nine Ways to Better Control Your Inventory

Multichannel Inventory: What You Need to Know