Inventory control A&A is tackling its last operations’ weakness !

Introduction – 1/2 This presentation explains why that after 14 years, A&A Computers is finally serious about improving its inventory control systems. It explains the effects of a poorly managed inventory.

Introduction – 2/2 It mentions the desired outcome of the improvement activities. It lists some of the methods used in the consultancy. It outlines what the future tasks are: To make sure that the inventory system remains accurate and reliable. To make use of the accurate stock counts.

Historical overview – 1/4 Some companies are started with a huge loan or investment. In their starting up period, a management team sets up all financial, sales, technical, marketing, and other systems. Example: Hughes Motors in Usa River.

Historical overview – 2/4 A&A computers was set up by its owners, with a small starting capital. In the first two years more money was injected, until A&A Computers finally could stand on its own legs. From then on, profit was used to expand the company’s operations.

Historical overview – 3/4 Management capacity and systems grew slowly along with A&A Computers Ltd. Examples of starting / improvement years: Management system Started in year Improved after years Repair database14, 11 Purchasing6In little steps HRM & salary admin19 Warranty (‘RMA’)1011 Accounts113

Historical overview – 4/4 For over 5 years now, A&A Computers has tried to improve the stock recording, but its accuracy has remained poor. To counter this, we have done monthly 100% stock taking. But, there have been insufficient explanations for stock differences, continuously. The quality of A&A Computer’s inventory system has remained behind all the other systems that the company uses.

Effects of poor inventory control - 1/3 Through under-stocking we run out of items, so we loose selling opportunities. Through over-stocking money is ‘locked up’, so that we are unable to order other, more essential stock.

Effects of poor inventory control - 2/3 The exact stock value is unknown, making our accounts inaccurate. It is difficult to detect fraudulent transactions.

Effects of poor inventory control - 3/3 In the next few years, A&A Computers wants to open two more branches. We are not ready for new branches, because our stock system must be accurate and real-time updated.

Desired outcomes – 1/2 Less than 1% error when comparing stock counted and stock on record. 100 % explanation of any stock level differences. Note that this accuracy has already been reached in Moshi – so it is possible!

Desired outcomes - 2/2 Up-to-date and accurate stock levels in QuickBooks, and on our website, so that we can: Check availability while selling. Order more accurately. Keep optimum stock levels - at all branches.

Methods to improve inventory – 1/4 This year, a consultant has: Analyzed our stock system. Proposed improvements. Tested results. Followed-up on implementation of improved systems.

Methods to improve inventory – 2/4 Some of the challenges encountered: Several employees resisted change. They feel comfortable to continue using our old systems. Arusha stock is distributed over several locations: store, shop, display cabinet, showroom, workshop. In QuickBooks, stock is not properly recorded, and not in real-time.

Methods to improve inventory – 3/4 Some of the improvements proposed, and now used are: The part request cards were replaced by Parts Tracking books. Bar codes were attached to all parts. It was tested that with a scanner, quick and accurate stock taking can be done. By instructing sales staff, QuickBooks is gradually updated sooner after receiving or releasing parts.

Methods to improve inventory – 4/4 At this stage, test results are few: It will probably take several months to get stock reports accurate. Soon we can start sampling actual stock levels, and compare them automatically with recorded levels. After testing, more improvements to procedures may be suggested.

Future inventory tasks - 1/2 After all inventory control systems are in place, there is more to be done.

Future inventory tasks - 2/2 The consultant is to follow up that: New procedures are understood New procedures are used as intended. New procedures are adhered to. Once stock levels are accurate, we can use the sales/week value from the QuickBooks’ report “Stock details” to improve calculation of order quantities.

Conclusion – 1/2 A&A Computers must have a well- managed inventory system, so that: it can improve its operations It will be ready for expansion.

Conclusion – 2/2 Staff of A&A must understand the importance of improving inventory procedures, and be willing to put in the extra effort needed.

The end September 2009 Alex Righolt