Inventory Control: Part 4 – Physical Inventory

1. Inventory Control:Part 4 – Physical Inventory

2. Storage and Warehouse Activities • Receive Goods – Verify Order Quality, Quantity • Identify Goods – Stock-Keeping Unit (SKU) • Dispatch to Storage • Hold Goods and Protect • Pick Goods • Consolidate (Marshal) Shipment • Dispatch Shipment • Maintain Information System

3. Cube Utilization – 3 Dimensional Thinking • Utilize Pallets – 48״x 40 ״x 4 ״Platforms. Stored with 2״Clearance. Can be Stacked with Forklifts. • Accessibility is Important. • Use of Racks Can Save on Handling Costs. • Maximize Cube Utilization.

4. Warehouses, Forklifts, and Pallets

5. Stock Location • Group Functionally Related Items Together – Order Picking Easier • Group Fast Moving Items Together – Work of Moving In and Out of Storage Reduced • Group Physically Similar Items Together – For Items that Require Particular Storage Facilities and Handling Equipment • Locate Working Stock and Reserve Stock Separately – Order Picking in Compact Area

6. Stock Location Fixed Location - Assign SKU Permanent Location. Minimizes Record Keeping but Poor Cube Utilization (Typically 50%). Point of Use Storage – Increases Accessibility and Decreases Handling. Used with Just-In-Time (JIT) Central Storage - All Similar Items in One Location. Floating Location – SKU’s Stored Where There is Appropriate Space. Good Cube Utilization but Access More Difficult. Normally Requires Computer. 6

7. Order Picking • Area System • Zone System • Multi-Order System

8. Inventory Accuracy • Accuracy Needed for • MRP Gross to Net • Satisfactory Customer Service • Efficient Operation • Analysis of Inventory • Inaccurate Records Can Result in • Lost Sales • Shortages and Disrupted Schedules Resulting in Poor Delivery • Excess Inventory of Wrong Items • Low Productivity • Excessive Expediting

9. Inventory Errors • Unauthorized Material Withdrawal • Unsecured Stockroom - Theft • Poorly Trained Employees • Inaccurate Transaction Recording • Lack of Audits and Inventory Counts

10. High Tech Methods of Recording Stock • Bar Codes • Radio Frequency Identification (RFID). Used Successfully at Wal-Mart and FedEx.

11. Auditing Inventory • Periodic Inventory – George Plossl Said “Taking Physical Inventory [is] Like Painting; the Results Depend on Good Preparation”. Normally Requires Shutdown, Excessive Paperwork, High Labor Costs, Poorly Trained Labor, Hurried Job. • Cycle Counting – Continuous Counts Each Day: A Items Counted More Frequently than B or C Items. Results in Timely Detection of Errors, Trained Personnel, and Less Disruption.

12. Cycle Counting Example ABC Inc. wishes to count A items 4 times per year, B items 2 times per year, and C items 1 time per year. There are 500 A items, 3,500 B items, and 11,000 C items. Plan a cycle counting procedure.

13. Cycle Counting Example Note: Daily Count = 20,000 / 250 = 80

14. Counting Frequency • ABC Method • Zone Method • Location Audit Method

15. Text Chapters Not Covered • Chapter 7 – Purchasing – SCM 442 • Chapter 13 – Distribution – SOM 416 • Chapter 14 – Products & Processes – SOM 416 • Chapter 16 – Total Quality Management – SOM 467