Tips for Improved Inventory Control: Part 5/8

16. Does your present system provide cycle-counting functionality? Cycle-counts have become SOP with a growing number of mid-sized firms since more business software packages now provide this functionality. The benefits of employing a cycle-count regimen over periodic stock-wide physical counts are great. Cycle-counts are less disruptive to operations, offer greater specificity in determining what items should be counted and generally force greater discipline into the organization’s inventory management.

17. Does your software provide inventory (cycle) count accuracy and trend reporting? If so, you should consider setting management objectives and use these reports for measuring your attainment of the objectives. Perhaps your objective would be to attain 90% accuracy in the first quarter of your new inventory management initiative, 95% accuracy by the end of the second quarter, 97% the third and 99% at the end of one year.  This gives your staff concrete goals to strive towards. Rewards could be posted for completing each milestone.

18. Does your software provide ABC inventory management functionality? Do you use it? Setup correctly, ABC analysis enables you to pay the closest attention to your top sellers. For most companies, the Pareto Principle applies to inventory management. If you can exercise tight control over the items that comprise the top 20% of your sales (or profits), you will have attained 80% of the maximum benefit to be attained from tighter inventory management. Think what an improvement that might represent to your bottom line! Perform cycle-counts frequently on your “A” items. You will derive a greater benefit for your hard work than if you devoted your attention to the less important “B” or “C” items. The law of diminishing returns applies to inventory management!

19. Do you need to record lot numbers for any of your products? If so, are you under a regulatory constraint (such as FDA 2400 for food safety)? Or, do any of your customers require lot number traceability? Do you need to achieve or maintain ISO 900X certification? Does your present software provide sophisticated lot number assignment and tracking? Do your products carry expiration dates? Can you record lot numbers for purchased raw materials and trace those lot numbers through to your finished product? If not, how are you tracking lot numbers now? Typically, off-line tracking is done via Excel spreadsheets. However Excel does not provide the failsafe certainty of recording lot numbers right in your accounting system. Finally, does your present software provide physical/cycle reporting by lot number?