Wouldn’t it be nice if . . .

by Scott Stratman

Wouldn’t it be nice if you knew exactly how much of any item you had in inventory with 100 percent assurance that what the system said you had was actually somewhere in your warehouse (vault)? Wouldn’t it be nice not to put customers on hold to verify that you really had some here? Wouldn’t it be nice if when you did your dreaded annual physical inventory (why do we do those anyway?), you were not shocked to find an over abundance of some items and a myriad of items no one knows anything about? Wouldn’t it be nice if people actually used your expensive computer system to track your assets? Wouldn’t it be nice if all your competitors were the ones asking these questions instead of you?

Unfortunately, these questions get asked and asked too often in today’s distribution environment. We all know the answer.  It wouldn’t be nice, it would be great!

So, how do we get ourselves in these situations? How is it that we risk literally hundreds of thousands of dollars without knowing how precise we are? No one said that distribution was an exact science, but pieces of it are scientific. One scientific piece happens at purchasing.

We can use our expensive computer system to help, or we can just gut it out. I prefer to use the computer system to guide me, as sometimes my gut is wrong. I prefer to use data input on a consistent basis to give me the critical pieces required to buy smart, rather than rely on my gut, seasoned over the years by doing it a hundred times. The gut check purchasing personnel are not useless by any means, but their gut should be used as a safety net only, not as the guiding light.

Having been in this business for many years, and seeing quite a few purchasing personnel, I can attest that some of them have very seasoned guts. However, the time has come in this business of shrinking margins, stiff competition and required creativity to use additional help. Purchasing personnel need to get intimately involved in the software bought to aid them in buying right. There is only so much data one person can keep in his or her head, sort when required and implement when writing company checks to a vendor. Some of them need to be trained on good purchasing principles, or maybe re-trained on the software package.

For any distributor with more than one location, using critical data-centered systems is a prerequisite for success. But success is based on proven, consistent practices that feed good information into the system. So, it requires sales personnel to be more diligent in getting sales orders processed on a timely basis. Not only do they have to be timely, they need to be right. It requires receiving personnel to receive product correctly, taking great measure to verify packing lists, purchase orders and receipts. Frankly, if you are having difficulty keeping your inventory in sync after a thorough count, look at your receiving processes. It is the one place you have to get it exactly right.

If you were shorted on a shipment, correct it immediately in the system. If you were missing ordered products, correct it immediately in the system. If you got something that you did not order, either send it back or receive it and capture it immediately.

Those companies that do a great job of keeping their inventory in sync with their system do a double check at receiving. They make darned sure that all the documents and products match up before putting them away.

These same companies take great pains to conduct the put-away function with a high degree of accuracy. They don’t just put the stuff where there is room or an empty slot on the rack. They have a plan in place before the material even arrives on the dock. They have established a vault layout that ebbs and flows with their volume and seasonality. They might not go to great lengths to check every single item, shipment and package, but when it goes to the shelf, it is right. They know what they received and have made the necessary corrections to the system.

Once it hits the vault, gets moved around, picked, moved some more, it is much tougher to get it right. Funny how we check outgoing orders twice or even three times to make it right, but we don’t do that at receiving (well, some of us don’t). Look at your receiving practices and make them tough, tight and stringent. While it is hard to believe, you actually have more products coming in than going out. It doesn’t seem that way at times does it? However, it is mathematically impossible to have the reverse.

Once put in the vault, what happens to product? Does it stay put until picked? Does it get moved at the discretion of the forklift driver? Who determines what plan to follow? Do you constantly move product to make room for more products? If so, who makes sure the scorekeeper (your software package) knows about it when it happens?

Step one is the easiest of all.  Make sure every square inch of space that is or could potentially hold inventory is marked. If you have not picked an order yourself of late, go out and give it a try sometime. You will get a good feel for how easy or difficult it is to follow the signs directing you to a proper pick. You might want to consider starting at point A of the vault and working your way to point Z and make sure that every possible storage location is labeled. Every possible location includes staging areas, overflow locations and even yard locations.

Taking time to make simple signs indicating aisles, rows, racks and bins can go a long way to help your overall inventory accuracy. These simple signs help those putting away product find the right location. It also helps those picking product find the right bin based on the information and directions on the pick ticket. That is the basis for picking, the pick ticket, which tells you where to go to find what you’re suppose to be picking.

Without good directions that match up to the street signs (labels), picking becomes somewhat of a scavenger hunt. Only those that have been around for a long time can find what they are looking for. Newer personnel spend countless wasted hours hunting and searching for something that looks like the product described on the pick ticket. It might sound simple, but go back to your vault and see how well your facility is marked. Do you know where to start picking? Do your vault personnel know where they should put material upon arrival? Keep it Simple Stupid (better known as the KISS philosophy) can drastically improve your inventory accuracy.

Wouldn’t it be nice if when you tested your inventory accuracy by selecting 100 random items to count, that your accuracy rate was 100 percent instead of 50 percent or 60 percent. The reason you need the accuracy rate to be in the high 90 percent range, is because the numbers of on-hand or shelf-stock products are also the basis for your replenishment procedures.

If what you think you have is not what you really have when purchasing replenishes, you will either bring in more than needed, or not bring in enough to meet customer demands. Thus, you have encountered the main reason why purchasing always seems to be behind the eight ball. It is also why sales hassles purchasing and the vault personnel because their customers are unhappy with low fill rates, or get wrong products in their shipments.

It is a never-ending struggle, but there is hope. From the moment you order product, you need to take great care in tracking its every movement. Even if it just sits there, you need to make sure you know where it sits. So, take more time in receiving to get it right the first time. Make sure you have a plan for putting away received products before they arrive and get shoved wherever there is room. Make sure you know where aisle one or aisle A is, and build from that starting point with numerous street signs and labels. If you do some of these simple things, you might just find yourself saying, “Wouldn’t if be nice if we had another cycle count with 100 percent accuracy.”  Trust me, it could happen!

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