WAREHOUSE INVENTORY CONTROL
If like so many companies today you are faced with an ever growing labor shortage, fading knowledge due to increased retirements, GAP of skilled workers, stringent compliance and regulatory requirement aimed at safety and security.
The lack of standardization and / or implementation of procedures and policies between upper management and operations will create a GAP in business efficiency. With GAP’s like these there is little wonder why companies are facing inventory shortages / shrinkage and increased time waste and mismanagement.
In order to maintain optimal business efficiency the company’s directors need to take a positive leadership role. The lack of positive direction and reliable information will impair the company’s ability to ascertain;
Know the quantity, location, condition and value of it’s assets
Safeguard its assets from physical deterioration, theft, loss or mismanagement
Prevent unnecessary storage and maintenance costs or purchase of assets already in stock
Determine the full costs of programs that use these assets
Managing the acquisition, production, storage and distribution of products and services is critical to controlling costs, operational efficiency and mission readiness. Proper accountability requires detailed records of itemized or acquired products and materials are maintained. The costs associated with poor inventory management go far beyond that of an item of lost inventory.
Leadership is possibly the single most important element of a successful business and appears everywhere. Leadership and standards are set at the top management level and are filtered through every department.
Managers are required to provide an inspiring vision, make strategic directions that are understood and followed by all and instill values that guide subordinates. These philosophies and values provide focus, clarity and direction.
In order for a company to move forward with their objectives; maximizing revenues, containing costs and best manage their current assets, they need to take stock of their value and evaluate the risks facing these assets. Costs to a company from poor inventory management will vary considerably, yet, the following costs are seen frequently:
Time Mismanagement
Companies that have problems with inventory accuracy rates frequently have a time mismanagement problem where employees spend unnecessary time looking for items of inventory
Over Purchasing of Inventory
When inventory mismanagement is seen, it affects purchasing. If items of inventory are not located in stock (NIL) and in order to maintain customer satisfaction the purchaser replenishes items not found in inventory. If that item is later found in stock, this over-purchase can create an unnecessary cash shortage
Inventory mismanagement creates many unnecessary costs and provides an opportunity for unscrupulous employees to create inventory shrinkage. Insurium has created an inventory best practice that covers the following eleven modules;
Establish Accountability
Create Written Policies
Selecting an Approach
Frequency of Counts
Segregation of Duties
Enlisting Knowledgeable Staff
Supervision
Blind Counts
Physical Counts
Investigations
Evaluation
Case Study
A sixteen-year-old company that retained approximately $10 million in active inventory in three separate warehouses utilized a brand name computerized inventory software system to track and maintain each item. These items of inventory were provided a unique personal identifier.
The company’s accuracy rating for inventory was less than 50% even though they had incorporated RFID technology to track individual items.
We found inadequate leadership from executive management, which resulted in middle management taking control of inventory. The middle managers manipulated the inventory software system. This lack of management and knowledge allowed middle management to make up their own rules allowing themselves to write off inventory at will or switch RFID numbers of good condition inventory items to those that were returned broken. Not only did we identify lost inventory rates of approximately 50% but also, we identified losses exceeding $250,000 per year.
The Insurium Inventory Best Practice will demonstrate how to avoid these pitfalls and implement strategies that enable inventory accuracy rates.
For more information on how to obtain your copy of this booklet contact Insurium at info@insurium.com