Inventory management has been at the forefront of most software systems since the early 1980s. This was the first functional area that was addressed after basic financial accounting. You would think that after all these years we would be at a point where inventory accuracy would be a given. Well, think again! Thirty years later most companies cannot claim higher than 96% inventory Record Accuracy (“IRA”), characterized by:
- Computer records match physical records
- Correct location
- Correct quantity by location
The above are actually bare minimum requirements and yet firms still cannot achieve the level of record accuracy required for success in today’s fast paced business environment.
As of today I can definitely and positively state that we have the tools to achieve this goal. We have software packages from ERP to Bar Code to Mobility Applications and Document and Workflow Management software systems that allow us to maintain accurate inventories.
We can use Bar Code to solve timeliness issues and user errors. We can use Bar Code for drive by counts for unplanned cycle counts. We can use mobile applications from anywhere in the world to perform transactions and access information.
Given the fact that we have adequate software systems, we can implement simple policies, such as requests that cycle counts be performed for all items at:
- zero inventory by location
- received line items by location
- shipped line items by location
- dust test
- and many more.
This type of cycle count requires no real thought process – I am there, I have a bar code gun, I am touching the items therefore I will count the items.
This approach will automatically update the computer maintained inventory and, due to cycle counting processes inherent in these systems, any discrepancies will be highlighted for review and immediate attention.
The issue here is no longer the tools – i.e. the software. The real issues are the users and their processes. The best software solution cannot solve inventory issues. The software cannot prevent short shipments at order processing – you know you have 50 of item “A” you accept the line item on the customer order but cannot find them at picking and shipping. The software cannot prevent short manufacturing runs caused by inaccurate inventory information available for the material resource planning (“MRP”) calculations. The software cannot be held responsible for inventory waiting at receiving or shipping docks. The software cannot be held responsible for inventory being invisible.
Users have a hard time accepting that the software is a tool! You may have bought the best tool available on the market but in the end it is only as good as the interface between the chair and the keyboard.
In other words, in today’s Enterprise Software market, the tools are amazing and they supply you with all you need to complete the journey to inventory excellence. The issue is users do not follow the process as set in writing or as defined to the software systems.
I have run into more companies than I care to admit where the old “informal” system is still running the show. I hate to age myself but Oliver Wight (considered by many in the industry to be the father of MRP) used the informal system versus the formal system to explain the discrepancies between computer inventory levels and physical levels. Back then – early 1980s – software systems had many limitations:
- batch processes
- complicated user interfaces
- limited bar code capabilities
- no workflow and document management capabilities
- mobility was not as it is defined today
- much more can be added to this list but I feel the point is made.
We have the tools, we have the capabilities, we have real time/on-line/mobile access to everything – we are out of excuses!
If you cannot meet at least that 96% Inventory Record Accuracy level with today’s software systems then – sad to say – you are the problem and not the system.