Operations Excellence

All inventory moves through the value-added process in discrete units, and must, of course, be tracked accordingly. It is handled by a variety of individual employees, each with different talents, personalities, and functional emphasis. As a company focuses on this movement, it quickly recognizes the need to develop proce­dural and behavioral standards to guide these individuals in their handling of the discrete inventory units. Paradoxically, it is also critical that the employer maximize the individuality and creativity of each employee, because it is precisely this originality that makes the human resource not only the most valuable but also the only limitless resource available to a company. An effective structure for accomplishing this involves developing functional and cross-functional self-directed work teams. In unleashing the potential of these work teams on the discrete inventory manage­ment problem, one takes full advantage of a very powerful characteristic of motivated individuals; nobody likes doing some­thing twice, or taking longer to do something than is necessary. By superimposing on this team structure a measurement system that effectively measures the value and costs being added as the inventory moves, and by measuring and rewarding team perfor­mance based on those measurements, a company virtually guar­antees a structure that focuses on continuous improvement and an increasingly waste-free value-added process.

The road to excellent inventory management must be marked with excellent procedures. Well-designed procedures that track inven­tory efficiently through the entire process are also suitable for managing the flow itself, since they include feedback and meas­urement features that encourage continuous improvement, waste elimination, quality, and scrap reporting. Such procedures, when followed faithfully, should easily qualify a company for ISO 9000.

Discrete inventory management ultimately involves knowing the what, when, where, why and how much of all inventory at all

times. Information systems developed to effectively track inven­tory movement can be adapted to tracking all productivity in the form of value-added dollars. It makes little difference what recording and reporting methods are chosen; along with the ability to track materials through various stages of production comes the ability to assign and track labor and overhead costs, or fixed and variable costs. It is even conceivable that a system could assign a standard move cost to each transaction, regardless of whether it adds value or not. Such a system could be invaluable in reducing the cost of non-value-added inventory activities. Ironically, the goal of such a system would be to obsolete itself, since such tracking becomes gradually less necessary as efforts at reducing the need for inventory lead to fewer interruptions in the process, a flow environment, and minimal non-value-added activities.

Merely focusing on inventory accuracy yields wide-ranging ben­efits that may seem to have little to do with accuracy itself. Teams that are formed to focus on inventory accuracy and organized along process lines will not only improve accuracy but will also help improve communications, production flows and techniques, and data flow. If given responsibility for procedures, training, and execution, and if rewarded based on cost performance as well as improved accuracy, well-functioning and well-trained teams will effectively drive costs down and efficiencies up. In addition, the resulting culture of cooperation, awareness, discipline, and continuous improvement developed through the effort to track inventory will spill over into all aspects of operations.

The search for opportunities to improve discrete inventory man­agement focuses on movement and handling. Inventory is easy to track if it sits in one place. Concerned and dedicated team members at first complain about inefficiencies, and then, when empowered to make changes, eliminate them. They drive elimi­nation of the need for receiving inspection. Exceptionally bright and educated employees might figure out that, if we can reduce lead times from the vendor, they have a better chance of spending their time moving what is really needed, rather than on something that was rushed here "just in case" only to sit on the shelf for two weeks. Warehouse organization improves as employees search for the shortest and most direct routes from the receiving dock to the production line. To minimize handling costs, scheduling must improve to the point that the flow of orders and materials is as smooth as possible, thus optimizing the utilization of personnel, equipment, and space. Such scheduling improvements are, of course, highly desirable because of their positive impact on the entire production process. Standardized packaging makes han­dling and counting much easier, and it won't take long for educated material handlers to recognize the benefits and start driving for improvements in that area. While some may initially scream at suggestions of eliminating their paper backup, paperless systems are a secret dream of all warehouse employees, and a logical target of this type of improvement process.

All manufacturing operations buy inventory in some form, add value to it, and distribute it to their customers. A strategic management focus on reducing the need for excess inventory throughout the value-added process will in turn reduce the support costs that had previously been dedicated to maintaining that need. Only through reducing all of these costs can a company hope to gain an appreciable competitive advantage.

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Supply Chain Inventory Management  Total Quality Management Principles
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