The inventory nobody trusts

The problem it solves

The system says there is stock and the shelf says otherwise. Two weeks later the company buys material that was sitting at the end of the aisle, behind a box nobody had opened. Both scenes happen in the same business, sometimes in the same week, and neither surprises anyone any more.

An inventory nobody trusts changes the behaviour of the whole organisation. Purchasing orders extra so as not to run short. Sales promises dates with a cushion it would rather not have to defend. The warehouse counts by hand before releasing a large order. Each of those behaviours makes sense in isolation, and together they tie up cash, fill space and make the next figure in the system even less trustworthy than the last.

The cause is almost never the software. It is the moment the movement gets recorded: whether the receipt is entered at the end of the day, whether the return is entered when someone has a minute, whether the emergency issue is entered at all. With the record running behind, every count produces a discrepancy, every discrepancy is adjusted without investigation, and the adjustment teaches everyone that the number is negotiable.

What it covers

The workshop follows accuracy to the point where it is lost. The group walks the four moments at which inventory changes, receiving, issuing, returns and adjustments, and examines each one: who records it, against what document, at what moment, and what happens when there is a rush. The rush practices sit behind many of the discrepancies, and almost none of them is written down anywhere.

From there the recording gets redesigned to happen at the moment of the movement rather than at the end of the day. The group defines who may authorise an issue and what that leaves on record, because an issue nobody records throws the inventory out just as a loss would, and it is the easiest one to prevent. In a practical exercise, participants reconstruct the journey of an item that recently went out of line and pinpoint where the record and the shelf separated.

The second half replaces the annual count with frequent partial counts, ordered by turnover and by value, so that fast-moving items get counted often and dormant ones seldom. The group settles what happens to a discrepancy: who investigates it, within what period, and on what condition it may be adjusted, because adjusting without investigating is the practice that guarantees the next discrepancy and makes the count pointless.

The close covers reordering and dead stock. Reorder levels are set per item from consumption and supplier lead time rather than from the judgement of whoever happens to be ordering that day, and the group identifies what has been occupying space for months so a decision can be made about it. A handful of accuracy measures a manager can follow without buying anything rounds out the session, because inventory control is held in place by a routine somebody maintains, not by software.

What participants learn

• Analyse the four inventory movement moments and locate where accuracy is lost.
• Implement recording of receipts, issues and returns at the moment they happen.
• Design partial counts ordered by turnover and by value.
• Apply a discrepancy investigation procedure before authorising any adjustment.
• Evaluate reorder levels per item from consumption and supplier lead time.

Agenda

1. 01Where accuracy leaks: receiving, issuing, returns and adjustments
2. 02Recording the movement as it happens, not at the end of the day
3. 03Partial counts driven by turnover and by value
4. 04Discrepancies: who investigates them and what follows
5. 05Reorder levels set by consumption and lead time
6. 06Dead stock: what is taking up space, and since when
7. 07Who may authorize an issue, and what that leaves on record
8. 08Accuracy measures a manager can track without expensive software

What the organisation leaves with

• A map of the points where the record and the shelf currently separate.
• A calendar of partial counts driven by turnover and by value.
• A written rule for investigating and adjusting discrepancies, with owner and deadline.
• Reorder levels defined for the fastest-moving items.