Introduction
Do you have catalogue accuracy problems? Typical symptoms:
o Lots of catalogue errors
o Surprise backorders, unplanned shortages, "lost material"
o Nobody believes the records-- numerous calls to "check" on availability
o Air freight bill exceeds the national debt
o Nasty financial reporting "surprises"
o Lack of consensus on importance of accuracy
o Lack of consensus on how to quantum it
o Inability to reconcile inventories, cycle counts
o Error causes largely unknown
o Weak/no enterprise tradition of data accuracy
o New systems/software implementation causing more confusion
Solution recommendations are presented as follows...
Organize Project
Results are ordinarily best when there is a bit of a crisis climate established. enterprise as usual won't ordinarily serve to get serious catalogue accuracy problems fixed within two months. Sometimes a humbling blow, such as losing millions in an catalogue "write-down", or an unfavorable "write-up" by a customer, is helpful to shatter the status quo and energize an society to begin work in earnest on a solution. Top level executive activity works best to motivate and mobilize people. At a minimum, perception of a precious qoute is needed, with some realization of a need to spoton it.
This description is also ready on our website: Proaction - Generating Best Practices. It is an excerpt of a paper originally written by George Miller, Founder of Proaction. It has been modified and updated by Paul Deis, Proaction Ceo.
Try to tie enterprise goals and objectives to scheme objectives, to help ensure that habitancy "buy-in" to the scheme and will be measured and rewarded on the results.
Once the first goals are attained, don't just enunciate victory and go home. Set up a lower key ongoing maintenance attempt to ensure that the qoute stays fixed and that further improvements are made.
o An executive Sponsor is needed, someone with the clout to keep resources and attentiveness focused on the qoute until completion. Results are ordinarily directly proportional to the impel and commitment of the executive sponsor. Sometimes it's not potential to get a sponsor until a case is made that there's a problem.
o A scheme Leader and Multi-Disciplinary Team is required, preferably from Operations, Materials, Finance, Distribution and possibly, Process and establish Engineering (depending upon the problems identified). In a large organization, a full time scheme leader may be needed. habitancy will be needed for catalogue verification, cycle counting and reconciliation. The estimate of manpower needed is dependent upon society size, complexity and magnitude of the problem. For example, one 500,000 sq. Ft. Process plant with about 4000 items and 30+% catalogue accuracy needed a full time coordinator, four full time cycle counters and two part timers for six months, tapering off after that. Often, consultants and corporate auditors partake to make projects more successful.
o A scheme Plan is needed, incorporating recommendations from this paper and other company-specific activities. This plan, along with a running list of accuracy associated issues and actions, should be used to drive the scheme and focus efforts on activities needed to attain accuracy goals. Issues should be identified, put on a scholar issues list, assigned to suitable personnel to solve, then discussed and tracked at every weekly meeting for the duration of the first revising project.
The plan should comprise exact activities, responsibilities and dates. It needs to be followed and managed competently. Unless carefully managed, a enormous estimate of scheme time will be spent trying to form out what the problems are, and getting resources assigned to them.
Choose Your Battles
Realize that there are itsybitsy resources available, and that these cost money, so prioritize by tackling issues gift the best payback and those that can be won.
Actual examples:
o For one company, it was very hard to keep track of color concentrates, since they were ladled out of barrels, were kept out on the floor, and didn't cost all that much anyway. So, these and other similar items were settled on "two bin" order operate and expensed, eliminating a whole class of catalogue description problems with itsybitsy more than a stroke of a pen.
o Another firm had three storerooms. The first one contained fabrics for airline seats and was very well organized and well run, so minimal attempt was expended to enhance it. The second one was a poorly controlled raw material storeroom with a short-timer supervisor about to retire. Material lead times were only a few days, so the supervene of errors was less serious. We elected to wait out his retirement, which was only a concentrate of months away. The third storeroom contained purchased parts and specialty fabrications. Lead times were long, costs were high and the consequences of errors were serious, so we elected to initially focus on this area. To narrow scope even further, we initially concentrated only on items needed within the lead time horizon and ignored obsolete and excess materials.
o The Vp, Finance in still an additional one manufacturing enterprise agreed to waive physical inventories for areas demonstrating that accuracy goals were being met, freeing up resources for more efficient purposes.
o In general, controlled storerooms are the easiest to improve, since they are often physically restricted areas, have management more oriented to accuracy concepts, transactions less branch to process-related errors and they can be more really counted. Then attack work-in-process areas, which are ordinarily more challenging.
o One team uncovered dozens of accuracy issues. These were prioritized so that problem-solving resources could be focused on the best payback items with the many chances of resolution.
o A few companies we worked with have gotten almost immediate payback by conducting location audits. Plainly check each location and collate it to your records. physical locations not in the records may be lively windfalls. The opposite case is cause for a medicinal cycle count adjustment. This advent requires far less resources than a physical count inventory.
o Most companies observed weren't able to reconcile all errors, especially in the beginning. They were advised not to even try. It's like attempting to bail out the ocean, because errors were being made faster than catalogue balances could be corrected, let alone diagnosed and reconciled. So, they focused on eliminating the essential Causes of errors initially. Every time a cause is identified and corrected, it may likely eliminate dozens, hundreds or even thousands of future potential errors. This view may be difficult to sell to some accounting personnel, who have been conditioned to equilibrium every debit and prestige to the penny. select your battles!
Define catalogue Accuracy
What It Isn't
We have often been told by representatives of assorted companies that their catalogue accuracy was high, even "world class," 95, 98 or even 99+%, when in fact, there were surprise backorders, unplanned material shortages and unexplained excess inventories. When asked about catalogue accuracy, shop floor and shop personnel would just smile and tell us their catalogue nightmare stories.
So why does this happen? There are separate ways of measuring it. For example:
o One firm view their catalogue records were outstanding because they were spoton within ,000 for a Mm inventory, or 99.7% accurate, they boasted. Well, it turned out that this was merely an arithmetic sum of the financial errors and that the absolute value of the personel errors was really 0,000. Even this sounded like 85% accuracy.
But, operations habitancy know that products are built with exact components and that customers are shipped exact products or services, not dollars. When other factors like posting cut-offs, location errors and part estimate errors were considered, it was calculated that accuracy was really only 66%!
Inventory accuracy is the probability of finding the right items in the right location and quantity that the books say are there. 66% accuracy means that 34% of items surveyed had quantities, locations or part numbers significantly differing from "book" records. finding at it an additional one way, for a ten item order, there would be only a 15% probability of finding all parts corresponding to what the books said was there. Is that any way to run a business? By the way, it's sad to say that 66% is about average.
Another guess for the accuracy credibility gap is that habitancy delude themselves, occasionally even lie. The author once had to fire someone who was falsifying counts. The sad news came out of a disposition audit designed to check the effectiveness of the cycle counting system. More often, habitancy just rationalize that things are much great than they really are. Example:
What It Is
95% accuracy is said to be the minimum suitable level to run a formal system. Our caress is that 95% is a lot great than the median company, but it's nowhere near what is required to run a world class operation, where 98 or 99+% is more appropriate. Going from 66% to 90% is easier than going from 90 to 95%, which is easier than going from 95 to 97%. When a enterprise sets a goal of 95, 98 or 99+% catalogue accuracy, what should that mean? We ordinarily recommend the following accuracy criteria, branch to enterprise extra requirements:
o Quantity of book to reconciled physical catalogue to be accurate, for example, within 1% for "A" items, 3% for "B" items and 5% for "C" items. These targets should reflect relative value of the material and the limits of counting process capabilities. Most firms collate physical to reconciled book quantity error vs. Book quantity to quantum accuracy, for convenience of computations. Sometimes we recommend comparing the calculated error to the weekly or monthly usage quantity, because it's statistically more valid, especially in a high-volume, low catalogue environment.
o Item identification must be correct, or it counts for two errors, since if it isn't what the records stated it was, then it must be something else. Unless catalogue habitancy are very suitable and knowledgeable about item identities, these errors often go unrecognized until detected by an inspector, output operator, or even a customer. We recommend item verification before storehouse or movement to the next process station. It is helpful to post item specifications and photos and train employees in their use to sacrifice such errors.
o Item must be physically in the exact "book" location or it is carefully an error. If you can't find it, that's even worse than not having it at all, because it cost money and it's taking up essential space. Make sure you define item locations neither too detailed nor too general. If too detailed, it will be burdensome to enunciate the records and operate material.
o Timeliness of records - Must be posted by some deadline, such as immediately when moved, within an hour, or by the end of the shift when transaction was physically executed. This greatly improves the timeliness of information and improves "cut-off" operate for reports and reconciliations.
o Accuracy ration = (number of items sampled meeting above criteria/all items sampled) x 100. We sometimes convert doing measures to error parts per million (Ppm), to make measurements more compatible with companies' capability systems.
Measure Actual Performance
Why It's Difficult
This too, is more difficult than it sounds. Many companies are Plainly unable to reconcile book to physical catalogue because they:
o Have multiple, incompatible catalogue systems.
o Can't scholar the timing "cutoffs" for count reconciliation.
o Poorly define and levy material and transaction flow procedures and policies.
o Don't have habitancy assigned to and/or schooled in catalogue records reconciliation.
Initial Survey
You'll need an first recognize to collate the level of accuracy. This is recommended, even if there is an ongoing principles in place, to help verify how well it is working. To collate the level of catalogue accuracy, pick a representative and statistically valid sample of items, crossing separate product lines, processes and areas. Consult an scholar in Qc or Spc (Statistical Process Control) if not sure how to do this.
Make sure you have business agreement on what is to be measured and how. Get business agreement on the measurement criteria (see section Ii, above). If there is more than one catalogue system, agree on which one(s) you will be reconciling to. Be aware of how these systems are updated and enlist the cooperation of those involved in their doing and maintenance.
Better results will be obtained if all transactions are posted before counting, especially if the catalogue principles is in poor working order. This helps eliminate a very common source of errors, "cut-off" timing. In particular, watch out for items in staging areas, Qc, Shipping, Scrap, Bond, etc. It's best to do the recognize while operations are shut down, since it further reduces the occasion of transaction cut-off problems.
For improved objectivity, it is recommended that habitancy who are removed from "ownership" of the current principles be used to audit or even supervise this survey. Bias may be inadvertently or intentionally introduced otherwise.
The recognize should be used to help establish "baseline" accuracy by area- for instance- "Store Room #1, "Shipping Area", Qc Hold #3", "Disk Assembly," and "Total." issue the results after faithful verification, then discuss and act on them. The first recognize often helps to establish the dialogue that propels victorious projects. It is potential that some diagnostic work can be done during the survey, but in general, we have found that diagnostics are problematic at best for a poor catalogue principles without baseline figures, good procedures in place and regular cycle counts.
Fix The System
Institute Improved Policies and Procedures
Procedures are often in need of a major overhaul. Many are poorly documented, unworkable or cumbersome. The scheme diagnostics, team meetings, cycle count results, discussion room pilot and worker suggestions can all funnel information to the habitancy who revise procedures.
Identify every singular transaction and policy potentially affecting catalogue accuracy. reveal and, if necessary, enhance, simplify and document them, then fully train all applicable personnel in their use. Keep easy concise procedures ready for employees' ready access. Have employees practice/drill in policy use. An catalogue principles test or "demo" database is a good tool to institution with.
o New procedures/changes should be reviewed with users in advance, fully tested and documented prior to implementation.
o Procedures should cover all aspects of catalogue transactions: receiving, inspection, stores, issues to floor stock, production, substitutions, transfers, scrap, rework, return to vendor, completions to stock, shipments.
Set Up Basic catalogue Movement buildings and Controls
Most companies lack a common understanding on how catalogue transactions- material and paperwork - should flow. One of the first evident symptoms of this is an almost total inability to reconcile cycle counts of active items, due to transaction "cut-off" problems attributable to unpublished/unenforced transaction document flow times. Forget about a full cycle counting agenda until this is corrected. First, establish, implement and enforce:
o Inventory "transaction flow map" showing all work centers/cells/stores areas, material and paper flows, transaction types and catalogue numbers, so that habitancy will know what should happen. When habitancy see a graphical depiction of principles flow and have it explained to them, it often helps them to decode the mysteries of a system.
o Flow times - How long it should take to receive a part, move it to stores, issue it, move it between operations. issue these flow times, post them, and get habitancy accustomed to working with them. feature transactions missing flow time targets.
o Cutoff times - How long it should take to post a transaction after it physically occurred. issue and feature similar to the above item.
o Drop points - Where material and transaction documents should be placed. Mark these areas Plainly to sacrifice confusion. Painted lines on the floor, signs, sometimes even fences, may be needed to get the point across.
o Logging and batch controls, especially for key "gateway" transactions such as receiving and shipping. Comparing daily posted transactions to the logs often helps detect missing or erroneous data. Logs can also be beneficial in reconstructing "crashed" systems.
Write Cycle Counting Procedure
Cycle counting should be the essential ongoing doing measurement, diagnostic and problem-solving approach, basically "Spc for catalogue control." It is a policy to help determine if the other catalogue procedures are working. The policy needs to fully reflect the total systems flow and timing. For instance, if inventories are updated daily by Mis, it may be essential to adjust for unposted transactions prior to completing reconciliation.
o In a high-volume repetitive output in a backflush environment, It is essential to log output occurring between backflushes and to know really when these were performed. In addition, knowing the whereabouts of discrepant material routed for inspection and alternate processing, but still unposted, is vital, since counts of material in the area may omit it.
Consignment catalogue rules sometimes need revising to facilitate cycle count reconciliation as well.
Run a operate Group
Once the agenda is underway, team members often want to speedily start an ambitious, large scale agenda of cycle counting. Some habitancy come running out of cycle counting seminars, flushed with enthusiasm, wanting to use their new tools immediately to vanquish the demons of catalogue error. In general, don't. Why? Because in most cases the infrastructure isn't yet in place to preserve an efficient cycle counting system. Make sure it is in place Before starting regular cycle counting, or you're in for some big disappointments and loss of credibility.
In the meantime, use the first recognize habitancy as a "control group" to help ordinarily and frequently collate the propagation of errors. Count and reconcile these items over and over again until you start to get the hang of what's wrong. Chances are, this will be a very tough chore initially, because of the many things wrong with the system. Don't be surprised if you can't recognize many item error causes with certainty in the first period. As you count them more frequently, there will be shorter intervals between counts, expanding the likelihood that error causes can be isolated. As the basic controls identified above are established, they will eliminate many errors and make it simpler to recognize those that remain. Make sure that problems are posted to the issues list, prioritized, assigned for resolution, discussed at meetings, completed, documented and resolved.
At some point, when the team feels that they have basic controls in place and have mastered operate group diagnostics, they can turn the cycle counts loose on a larger scale.
When the operate group is running in the mid 90% accuracy range, it's time to turn on large scale cycle counting. companies trying to turn it on too early may get swamped by heavy numbers of irreconcilable errors. Some even composition the errors when they start posting corrections before they've got reconciliation/posting procedures working satisfactorily.
Most error causes can be found and resolved during the first operate group period.
Make physical Changes
Paint lines on floors to indicate drop points and group boundaries. description tare weights on all containers used in weigh counting. Use bar code or other accurate, efficient data acquisition methods. Deploy counting scales where appropriate. Isolate obsolete catalogue for final dispositioning. Assign designated drop points for discrepant or "hold" status material. Ensure that there is adequate and suitable material handling and storehouse equipment. Sometimes something as easy as lines on the floor, a fence or a gate can make a essential difference. think a move to a process-related flow, which may greatly simplify material/inventory control.
A total facility location principles is essential for success in locating material speedily and efficiently when it is needed All inbound and in-transit material should be directed to locations, or they should be assigned upon arrival. If the location principles is easy enough, materials might be automatically routed. sacrifice the estimate of possibilities to make mistakes. The location codes should be Plainly marked all colse to the facility, so that there is no blurring about the location. Isolate/purge excessive, obsolete and damaged inventory.
Conclusions
As with most major convert efforts, catalogue accuracy needs strong, continuing management preserve to convert the culture and practices.
o Very itsybitsy happens in some companies until top management makes poor results unacceptably uncomfortable to those failing to deliver.
o Even after that, things sometimes don't enhance until meaningful doing measurements and revising mechanisms are implemented.
o Strong scheme leadership is the next most leading factor, along with a sound advent and an implementation plan.
o The price of continued catalogue accuracy success is eternal vigilance. When programs lose "mindshare," results often speedily deteriorate.
o Inventory accuracy is a permanent state of mind, not a quickie, one-time project. Periodic backsliding needs constant attention. This is one area where zealots and dictators are needed!
Successful catalogue accuracy efforts often have five phases:
1. Realization that there is a problem
2. Agreement on a clarification approach
3. Problem-solving phase
4. Records correctionv
5. Ongoing cycle counting/maintenance
o Inventory accuracy doesn't really enhance by counting things. It only improves when basic systems, procedures and training improve.
o Identifying issues and resolving them so that they never occur again is the key to achieving accuracy goals.
o Leadership and peoples' attitudes are the two most leading factors for success.
There are some essential differences in attaining catalogue accuracy in non-discrete, process, repetitive, cellular and project-oriented enterprises.
Learn them well and adapt to their needs. perceive also that most companies are a mix of separate environments, so mix approaches if warranted.
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