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.

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 Class Number of Items Count Frequency Number of Counts Per Cent Counts per Day A ,00010%8 B 3,5002 7,00035%28 C 11, %44 Totals 15,000 20,000100%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

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