Inventory Accuracy Pitfalls

Why do so many companies run into issues with inventory accuracy?  After working on hundreds of projects with companies spanning many industries such as aerospace, building products and food, I’ve found these pitfalls are the most common:

• Transaction timing issues – although they might perform system transactions, they are not completed on a timely basis. Thus, the system gets all mixed up – with the best case scenario.
• Transaction quantity issues – who hasn’t had fat fingers and keyed in 10000 instead of 1000? I’d be hard pressed to think of a client who hasn’t experienced that issue. In addition, there are transpositions of numbers, incorrect counts, etc.
• Transaction sequence – even if everything is perfect with the quantity and timing, there are countless problems with transactions being completed in the incorrect sequence. Unfortunately, systems are rarely forgiving with this issue. Typically, they would need to be backed out and start over.
• Transaction training – often, there isn’t a full understanding of how to perform the transactions. How to undo problem transactions is especially important but rarely understood.
• Count and adjust mentality – there are many companies that “count and adjust” to keep their inventory accurate. They miss the critical step of reconciliation and root cause analysis. Actually counting and adjusting can lead to even larger inventory issues because root causes are never getting addressed and the inventory gets worse and worse over time.
• Other inventory adjustments – other inventory adjustments often get in the way. For example, if we change one part number into a different part number and there isn’t a production entry for the transition, it is often done through an inventory adjustment. That can be fine; however, these inventory adjustments, timing and process needs to be understood and incorporated into the cycle counting process.
• Virtual warehouses – these can create havoc with inventory accuracy. They are often used for quality hold, to “save” product for customers etc.  Keeping track of transactions related to these is important and will have a profound impact on the rest of your inventory accuracy.