Defining Inventory Accuracy and Inventory Management Best Practices

How do you define accurate inventory? Learn tactics to improve your inventory accuracy and share best practices with others!

04/21/2020 | Marketing | 5

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Breakfast Roundtable Blog

In light of recent developments not allowing us to continue our Breakfast Roundtable discussions in person, we are starting this new blog forum for sharing about today's hottest topics.

Two times per month, we will start the discussion with relevant supply chain information. We encourage you to comment with your thoughts, share best practices, ask questions, etc. 

Looking for certification maintenance points? Every 5 comments will earn you 1 point!!

 

Defining Inventory Accuracy and Inventory Management Best Practices

How do you define accurate inventory? What tools do you use to measure your inventory?

This week's blog will look at what an expert says is a good benchmark for accurate inventory levels. We've also included some tactics for improving your accuracy. We'd love to hear from you in the comments! Share questions and your best practices for maintaining the right amount of inventory. 

Per Tompkins, a supply chain consulting company, "The ultimate goal of a cycle counting program is to achieve an absolute bin (location) level inventory accuracy of 97 percent or greater, eliminate the need to do wall-to-wall physical inventories, and to achieve this with the most efficient use of resources possible."

If your goal is 97% inventory accuracy, what does that really mean? Here's a way to measure your inventory accuracy:

    • If I check 100 items [including all valid locations] and the system balance matches the physical [floor or warehouse] balance within tolerance that is a “hit”.
    • If outside the tolerance that is a “miss.” If you have 97 out of 100 item “hits” you have 97% record accuracy.

If your accuracy is below your goal, here are some tactics you can use to improve your accuracy:

1: Establish a Control Group:

  • Pick sample items to count.  Perhaps 25 – 30.

  • Can be typical trouble parts, a statistical sample or, critical-to-customer-delivery items.

  • Schedule control group counting once per week. Can become a cycle counting training tool and/or an input to a cycle counting policy and procedure.

  • What is the advantage? Fewer transactions to review. Less time spent on the “effect” & more time spent on the “cause”. 

2. Education and Training:

  • “Why” is it important to have accurate inventory records?

  • “How” do we keep inventory records accurate?

  • Causes of inventory discrepancies: Systems [rare, but possible], Processes and/or Procedures.

3. Implement strict accountability. Since it can be hard to measure non-value added time spent on expediting or, extra dollars of additional inventory, we suggest setting clear expectations for accuracy and holding your team accountable for when goals are not achieved. 

Each company must decide what their goal will be for inventory accuracy, depending on the nature of your business. Some materials are harder to keep track of than others. It takes careful thought, commitment, as well as perhaps - a culture change, but achieving accurate inventory will help a company compete in the long run. 

What are your thoughts? We'd love to hear from you below on your inventory challenges and best practices! Remember, every 5 posts earns 1 certification maintenance point. 

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APICS 10 Step Forecasting Process

At APICS Milwaukee, we are often asked advice about forecasting. While forecasting is extremely important to effective supply chain management, it's still an imperfect science that is challenging to get right.

APICS recommends the following 10 step process to assist you with your forecasting efforts.

1.Determine purpose. For example, demand for production, capacity requirements, or staffing levels.

2.Set level of aggregation and units of measure. Specify sales in units or dollars, families, products, or SKUs (stock-keeping units).

3.Select horizon and planning bucket. Horizon, aggregation, and units are interrelated. A long-term horizon (years or quarters) usually uses total sales in dollars; medium-term (quarters or months) uses product families in units; and short-term (weeks or days) uses products or SKUs in units.

4.Gather and visualize the data (chart form). Visualizing helps in selecting the right forecasting technique.

5.Choose the forecasting technique. One or a combination of methods may work best for the combination of purpose, aggregation, time horizon, data availability, trend, and where the data fall on the stable-dynamic continuum.

6.Prepare the data for the technique. If there is seasonality, it should be temporarily removed prior to forecasting.

7.Test the forecast using historical data. Since periods in the past already have actual results, you can forecast using, say, June data to produce a July forecast and compare it to July actuals.

8. Forecast. After making adjustments, start using the forecast. If seasonality was removed for forecasting, add it back in before preparing reports that include confidence levels.

9. Achieve consensus on the forecast. For example, the sales and operations planning process gets agreement on one forecast.

10.Continuously improve. Monitor error levels and set policies for when error levels are too high. When they are, refine communications, data, or processes and techniques.

What process does your company use to forecast? What advice would you have for others on forecasting best practices? 

Engage in the discussion! Every 5 comments will earn you 1 certification maintenance point! 

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