Inventory Management 305

We were challenged to approach this paradigm from a new direction. If I only have X amount of resources to devote to this activity, how do I get the biggest value for my investment? Conventional ways to determine what to count each day is:

1. Numerical Order

2. By Storage Location

3. Risk (ABC Classification)

4. Activity Criteria

Since we were holding an annual physical inventory and had no type of cycle-count program in place, we were under no imme­diate pressure from the accountants to try to count everything once. This is primarily because no one would be hired especially to do the cycle counting. We were now able to focus on what we felt was important in operating the facility. We approached the task from the standpoint of utilizing what information could be captured, with limited resources, to correct problems. In order to uncover the most traceable problems, we developed an Activity-Based selection criteria. We had discovered in earlier efforts that attempting to resolve a discrepancy in counts had a success factor inversely proportional to the age of the error. Counting items that were in a low-usage category often led to a dead end. It was impossible to reconstruct the events of a month ago or even a week ago. What error could possibly be easier to diagnose than the one just created?

The success of our program hinged upon three events—the creation of an on-line display of transaction history, the on-line keying of Receiving and Stockroom transactions by the employees handling the material, and the creation of a "counter" in the warehouse location file. Employees who had never typed a word in their lives became proficient in the user-friendly environment created with their needs in mind. We removed forever the uncoupling of the transaction and the transaction reporting. Accountability was built into the system. We further never designated any individuals as the cycle counters. While it has taken considerable time and effort to train everyone in the diagnostic process, and there is still much room for improvement, we have instilled the preventative instinct into the employees.

In the beginning, we had a printout of the previous days transac­tions, and from that, the Supervisor and the employees selected a handful of items to count. The employees were relied upon to use their knowledge of the problem parts or the parts that for some reason would be considered to be high risk in order to find those candidates that would yield an error. We wanted to find the errors, so we could find the cause of errors with our limited resources. When the counter was added to the warehouse location file, we suddenly knew exactly where the activity was in the stockroom. Every time any transaction was performed on a part number, a counter was incremented by one. We further had a feature that allowed us to reset the counter when a cycle count was performed on that part number and location. Using a Query management program on our AS400 computer, we were able to generate reports on demand, location sensitive (risk sensitive) to focus our efforts.

The on-line display of transactions gave each employee the ability to look at the CRT and trace up to 200 transactions or 18 months' worth of history (whichever had the fewest line items). Since each employees were keying their own transactions and the employees' names were being captured in history, a trail was obvious on all transactions.

Like many other companies in today's competitive environments, we are actively seeking both input and ownership from our front-line employees. They have been a source of problem identification and problem solution. Many of the employees have developed a renewed interest in their jobs and responsibilities. Some of them have developed keen analytical skills in evaluating the causes of errors. Others are becoming good at analyzing flow of material and paperwork and are able to offer sound suggestions on how to improve. All this evolved from the traditional respon­sibilities for the pulling, putting away and staging of material.

About half of the final assembly activities have become demand pull stations, much of them pulling from the Receiving department or intermediate staging areas rather than the traditional stock­room. While it may not be obvious that these areas need cycle-

count activity, our employees were the first to recognize the problems with incorrect inventory balances (there was so little inventory, problems manifested themselves very quickly and harshly). These areas are not only subject to the activity criteria, but have the double exposure of high risk contributing to a higher than normal error rate in records. Some of that comes from the lack of security (outside of stockroom so random usage frequently goes unreported) and some is from the various ownership issues with the production lines on reporting scrap or other variant usages. As the working relationships between the stockroom employees and the production employees mesh, each understands the jobs better and ultimately better record management comes as a result.

To be Continued

Lean Six Sigma Training   Thinking Out of the Box   
Balanced Scorecards  Strategic Tactical Planning  
Supply Chain Inventory Management  Total Quality Management Principles
Lean Manufacturing Implementation  Lean Manufacturing Principles