You would be amazed at how many organizations today, both small and large, have a serious morale issue lurking beneath the surface of all the smiles, happy faces, agreement and apparent cooperation between employees, employees and managers, and employees and customers.

During the 30 years that I have spent in industries of all sizes, I have discovered from custom in-house bottom-up evaluation and interviews – that when this morale issue and its causes are not known, addressed, or shoved under the carpet – there is usually:

• poor productivity
• wasted time
• wasted resources
• customer turnover
• discipline issues
• a lack of creativity and imagination in problem solving
• employee turnover
• a circling of the wagons (departments and people)
• wasted profits
• and lot’s more…

How do you discover if you have a morale problem?

• don’t ask your direct reports
• don’t listen to the employees who always tell you what you want to hear
• start at the lowest level of employees
• conduct an anonymous employee survey
• use an outside resource to conduct some research

Every organization today is experiencing significant change. Change can be one of the greatest causes of poor morale. People are threatened by change and tend to pull in, hide, wait and see, not take chances, feel insecure, etc. You can’t stop the change, you probably can’t slow it down; you most likely are a victim of its relentless charge forward. So, what can you do to prevent it from having a negative impact on morale? Communicate everything (good news, as well as bad news) openly, on a timely basis, to the people who need to know or will be impacted.

One day, while I was in the President’s office, his coveted performance measurement landed on his desk. He rushed through the remainder of our conversation. His eagerness to view these latest reports gave me an idea. Because he wouldn’t surrender control of those areas generating most of the inventory transactions, would he, I asked, consider adding inventory measurements to hold appropriate supervisors accountable? He said yes.

I needed a performance measurement that would identify responsibility even if we didn’t know the cause of the error. I decided to copy a measurement I had heard about. A few days later, the president explained the measurement in a shop floor supervisor meeting.

Every part number traveled through at least two of their areas, he pointed out. A purchased casting, for instance, traveled through receiving in the machine shop. These two supervisors will be attached to that part number. And he meant “attached”. Via routings and bills of materials, we would assign supervisor codes to each part number. Every part number would carry the codes of those supervisors involved in its material handling and production process. We would also start a cycle count program – under my supervision.

Every cycle count would be classified as a hit or miss with A parts, B parts, and C parts, having progressively more liberal variances allowed. The new performance measure would assign hits and misses to each supervisor as parts carrying their codes were cycle counted. A “hit” count on a casting would result in a hit for the receiving and machining supervisors. A “miss” on the machined part number resulted in a miss for machining, stock room, and one of the assembly supervisors.

End-of-year bonuses could be substantial for the shop supervisors. For the current year, a supervisor would need a hit rate of 95 percent, and anything less would result in zero bonus. But those who achieved 95 percent would get 150percent of their bonus. And, if the year-end inventory accuracy reached 95 percent across the board, they would all get 200 percent of their bonus. Cycle counting would start after physical inventory – giving everyone 30 days to clean up their act.

Although the supervisors’ response was negative, for the next 30 days, they trained employees and suggested improvements to inventory procedures. Their work was impressive, but they didn;t yet appreciate that simply assuring all necessary transactions were done would probably raise inventory accuracy to the high-80 percentile.

At the end of they year, the performance measurements had been in place for seven months. Seven supervisors hit or slightly exceeded the 95 percent target, and the others just fell below the goal. The overall inventory accuracy was 94.2 percent, just under the 95 percent required for 200 percent bonus. But when the final summary was posted, the year-end number showed 95 percent, not 94.2 percent. The supervisors appointed a spokesman to tell the president that the final number should be 94.2 percent, not 95 percent.

The president sat back and spoke slowly” “You will tell the other supervisors that there was an error in math. The final number was 95 percent. Two hundred percent bonus checks will be distributed next week. If it wasn’t a math error, people would accuse me of violating my own bonus plan – possibly because your work effort was extraordinary, because you embraced the problem as your own, because yoou became obsessive about inventory accuracy. I don;t want to be accused of violating my own standards. Do you understand?”

The spokesman stood up and reached across the desk to shake the president’s hand. “Yes sir, I understand. And we would like you to understand that next year’s accuracy will be around 98 percent – and no math errors will be involved.”

Where to start? To be honest I could have started any place and made progress. However, I decided to start witha an aggressive attitude change about physical inventory. All departments had to embrace ownership. The company issued a letter listing the many failures of the recent inventory requesting suggestions on how to do better. Many people made suggestions; it was obvious there was a nucleus of concerned employees and managers. For the first time in the corporation’s history, operations and finance worked together to solve a problem inherent to both. These people were given tasks such as training and writing procedures and, in doing os, they learned how to work together.

We agreed to take a small physical inventory each month, in a selected area, prior to the “big one”. We started with stores for the first month and added an area each suceeding month. This helped people become trained and confident as accuracy improved.

I also implemented an aggressive cycle counting program. First, I found concerned workers and trained them to work together as a team. Documentation was written in Thai and we identified items by by ABC and cycle counted daily. We traced, tracked, and fixed systemic errors. We trained people to be more accurate keypunch operators or transferred them to other duties. Negative inventory became a thing of the past.

Receiving was expected to enter receipts on the same day and check quantities too. We set up a system to track materials sent for outside operations. Quality control was charged with inspecting for part-number accuracy, and engineering was charged with pursuing obsolete part numbers. The facilities division was charged with supplying maps of all plants, which identified all inventory areas and team assignments, as well as administering ticket control. We created counting teams, making sure a mixture of all departments was represented. Audit teams were created from accounting, engineering, production control, and plant personnel. A separate area was set up for unidentifed items, to be reviewed by the material review board.

Each month we tracked our accuracy and realized we were getting better. We closed in on our errors, but more important, we learned how to work together and accept ownership for physical inventory. The month before “the big one”, we held classes on how to count and use scales as well as how to complete the ticket. We used three-part tickets and kept them together until the area was bought-off. At that time, the white copy went to data processing, the blue to accounting, and the buff stayed with the inventoried material for potential post-inventory problems.

Engineering corrected the bill of materials. Obsolete inventory was purged and dormant inventory isolated. Work order quantities were strictly adhered to or items were returned to stores. Trailers shipped from other plants were loaded with either inventoy items or non-inventory items but not commingled. We sent letters to our vendors and customers alerting them to the days we were taking inventory. We purged the line the week of inventory. We set up a staging area that was pre-coounted, pre-audited and pre-wrapped. Once the area was bought off, this material was released to the line, which proved to be a real hit with production.

The big day arrived Friday at 6 a.m. and ended Sunday at noon. The teamwork was something to watch. People actually worked like a well-oiled machine. The biggest glitch – a lost ticket in one area – was found in the trash bin. The reconsiliation finished Tuesday, a day ahead of schedule. The results: an astounding 99.997 percent accuracy.

It is worth noting that all the planning for this inventory was, in reality, training, discipline, internal control, and getting people to think. We set the grooundwork for implementing a MRPII system, which was accomplished the following year. It’s not hard to take inventory. But it requires proper attitude, organization, teamwork, and common sense to take a good inventory!

I was asked immediately if I would observe the physical inventory of the company’s plants in Thailand and write a critique of the inventory process. I agreed but I realized that this exercise would provide insights into problems that I soon would inherit. To my dismay, I was exposed to a classic lesson of how not to take physical inventory.

Upon arriving, I was surprised to see counting and production taking place in the same area. The activity level in all five plants was the same – people counting and people working. I inquired about cutoffs and was told there were none. I asked if the lines were being purged of work in progress to make counting of the line and finished goods (FG) easier. No, the line would be working through the week. I felt a burning sensation in the pit of my stomach.

The second day was even more traumatic. No one was in charge, and the seriousness of taking inventory was lost on everybody. I called my liaison and asked warily if I was witnessing the company’s acceptable standard for physical inventory. He confessed that, due to high turnover and low educational levels in the Thai plants, physical inventory always was a serious problem. Because it was really an accounting problem, my suggestion would be more than welcome, he said. I wasn’t reassured.

I could understand sloppy inventory under the control of manufacturing personnel anxious to return to their routine and blissfully ignorant of the value of inventory accuracy. But what kind of accountant are they hiring? A serious lack of internal control and discipline and a fearful lack of understanding of basic inventory management values were evident – at the main plant and the provincial plants. I observed many problems: bills of material were inaccurate; proper ticket control was lacking; some items weren’t counted; all documentation was in English, but only a few key people spoke it; hardware items were counted by hand; key personnel (quality control staff and engineers) were’nt available for inventory; the item master was incorrect; a beginning inventory run wasn’t available; FG were counted twice, once at the last operation and again in the FG warehouse; the materials in transit wasn’t accounted for; scrap was counted as good material; the cost file wasn’t updated; and no cutoffs were enforced. But the biggest problem was an attitude that physical inventory was something to placate the accountants.

To say the least, the situation was a total disaster. My report was factual, critical, and supported with strong suggestions and a plan. As soon as the report was distributed, the finger pointing began. The outside auditors did not buy off the inventory, so we had three months to plan and execute a first-class physical inventory.

I led the project and spent countless hours teaching the staff that physical inventory isa team effort and ownership is all encompassing. We had to change attitudes, train key personnel, and enforce a new internal control. Our goal was inventory record accuracy of 98.8 percent. I was truly motivated to help the company overcome a $25 million inventory problem and prove that inventory record accuracy of 98.8 percent was possible.

Could we pull it off? Check out this column soo for the exciting conclusion!

However, there are other stories in the press about companies putting in ERP systems that took years of effort and millions of dollars, which ended up failing miserably, or companies losing market share and sales because of computer sustem failures. These events have led to a question quietly being asked: Do we need ERP or is there another way?

The answer is simple. We need ERP or something like it because the fact is that companies need systems. Companies are going to be designing products, managing change of the products, processing orders from customers, producing the product, shipping the product through scheduling transporation, etc. All of these activities need information systems to complete the process and transaction. Plus, companies also are doing different types of planning.

Companies need and generate a great deal of vital information, so they must have systems to manage the information and present it in a usable form. More importantly, these information systems interact and they need each other to maximize the benefit for the customer and the organization. Organizations need ways of collecting and analyzing data to support the “what-if” scenarios management needs to develop the future vision of the organization. All these facts are behind the growth of ERP systems over the last decade. The vision of combining actions – transactions in departments, sharing information between departments, and analyzing the data for management action – led to SAP, Peoplesoft, BAAN, etc.

If these facts are true, then why the questions? To be blunt, it’s because of management and leadership failures. Companies can fail in implementing these sophisticated and complex pieces of software. The failures can be of such magnitude the companies’ very existence can be threatened. But, I’ve never heard that the failure was caused by the code not working or the computers failing. What I’ve heard, seen, and read abouot in business journals, reports, and at meetings is a combination of management incompetence, petty politics, and ignorance.

I’ve been involved in several major ERP installations. I’ve seen or been part of projects that were two years behind schedule and millions of dollars over budget. I’ve seen an aerospace company spend millions on an MRP system that, when implemented, the only benefit was that the organization knew in real time instead of in batch mode that it was 80 percent past due on the floor. However, I’ve also been involved in ERP implementation projects that were completed in 6 or 8 months and greatly benefitted the company implementing new procedures in master production scheduling, forecasting, and purchasing and improve performance by 50 to 80 percent and cut costs by 50 percent.

Most people reading this column probably have had similar experiences and are also wondering why. The answer is simple – it’s called management. Companies and organizations that successfully use information systems have competent, driven management and leadership, who are competent in their understanding of how organizations work and how powerful information systems can give organizations a major boost, and driven in their ruthless drive to achieve the required results. A third characteristic of this competent management is a willingness to listen and involve people.

Unfortunately management like this is rare. Peter Drucker once wrote that 85 percent of companies have incompetent management. Dr Deming stated that 85 percent of problems in an organization are created by management. Both of them are right. Competent management that can visualize the future and motivate the organization are rare, so failures of systems are likely to continue.

What has changed is that today’s business climate is much more demanding and less forgiving. Organizations will either successfully meet the challenges or they will fail. The tools and information will be there. The key will be in using them properly.

The TPS was created out of necessity, according to Ohno. Following the second world war, Toyota faced the challenge of competing with mass production in the west while having only a small-volume, high-variety domestic market. In addition, Toyota’s president set a goal to match the U.S automobile industry in three years, requiring a ten-fold increase in productivity. The only way to pursue such dramatic results in these circumstances was to eliminate all waste from the system and to make it highly flexible at lo operating cost.

To Ohno’s observant eyes, the wastes that stood in the way of greater productivity were:

1. overproduction
2. wait time
3. transport
4. processing
5. holding inventory
6. movement, and
7. making defective products

All of these tied up working capital and/or wasted capacity (employee and machine) or material. Material had to flow, not sit around; and yield had to be 100 percent. Flow-type layouts and diligent application of quality principles and tools emerged. Subsequently, JIT and autonomation emerged as two main pillars of the TPS.

JIT – delivering or producing exactly what is needed, when it is needed, only in the quantity needed – addressed wastes 1,2, and 5. Autonomation, which involves automatic stopping devices on equipment and on manual procedures at aline to stop producing when abnormal process conditions are detected, addresses wastes 1, 5, and 7. Improved layouts (flow-type) and work methods addressed wastes 3,4, and 6.

Flexibility at low operating cost was improved with the creation of multifunctional workers and teams and by reducing set-up/changeover times. The company improved process reliability by preventive (or predictive) maintenance, and smoothed material flows by leveling the final assembly schedule.

Kanban’s initial role was to control the flows and production in TPS (i,e manage the JIT method of production). It accomplished this by signalling to the next stage upstream the identity, exact quantity, and timing of parts/materials needed in final assembly to produce product that would match market demand (rate and mix). By its absence, it also signaled that nothing was to be made or transported. By ripple effect, from stage to stage back through the production system, the entire TPS could be coordinated to flow smoothly at the market rate of use (or lack thereof).

In addition to this control function, kanban had a role in improvement. Kanbans signaled abnormal conditions when their flow was stopped by trouble on the shop floor. Also, by gradually reducing the number of kanbans (and hence, the directly related containers of WIP inventory), the system became leaner, revealing weak areas in the TPS (e.g., bottlenecks and processes with fluctuating capacities or usage). The trouble spots and weak areas became natural focuses for improvement activities.

The TPS isn’t the only lean production system, and kanban isn’t the only way companies signal the identity, quantity, and timing of items needed downstream.

The slow movers are those items or SKUs for which sporadic or very little demand exists. Typically, these items fall into the “C” category of the ABC analysis and constitute about 50 percent of the part numbers but only about 5 percent of the total value (where total value is based on total revenue and demand usage).

But a single C-class item, while generating less demand per unit, consumes about the same amount of overhead resources used to store the item (physical space, stockeeping personnel, obsolesence costs, and the time and effort to enter the data and to maintain it in the computer system) and to maintain the demand for the products that use these items. These resources are also used to maintain the demand and the products that use these items. Fir the first, the demand, there is marketing and the need for a marketing/sales person to call people and to forecast demand. For the second, the products that use these items, consider the time and effort needed for an engineer to design, revise, and maintain the demands. At some point, you have to consider that the costs for many C-class items often exceed the benefits.

But if this is the case, why aren’t more managers aware of the imbalance between costs and benefits? First, few managers or systems even collect all those costs incurred in supporting a given component or SKU. These costs, if not recorded, are assigned to overheads. Once assigned to overheads, they lose their managerial usefulness and are now a part of a large cost component for which no one is responsible. If these costs are not recorded, they cannot be measured. And you can’t manage what you don’t measure.

Another reason is fear of not having inventory or components in stock. Every marketing manager or salesperson seems to fear the effects of dropping a product from the catalog or reducing inventory levels. They worry they might lose one or more critical customers by doing so.

The third reason involves the measurement system. Put bluntly, most production systems do not reward activities that reduce the number of SKUs. (They do so indirectly through cost). As a result, the measurement system focuses attention elsewhere in the process, not on the total number of parts in stock.

One way to gain control over the C-class items is to turn the logic of ABC analysis around. ABC focuses on the critical or vital few – the 15 percent of the SKUs that generate or account for aboout 80 percent of sales. Instead of focusing attention on the top 15 percent, focus both on the top 15 percent and the bottom 5 percent.

The items for which there is very little demand (but potential costs) comprise the bottom 5 percent. If these 5 percent can be eliminated, you can expect potential improvement in the overall performance of the system.

By re-examining the bottom 5 percent on a regular basis (e.g. once every quarter), you can hope to eliminate the potential problems – these products with no demand but high costs. But before you can eliminate them, you must follow a process. The first step is to identify the bottom 5 percent using ABC analysis. The second is to examine them using a cross-functional team which will evaluate every slow mover and justify the continued presence of a slow-moving component.

One strategy for managing slow movers is to drop the SKU entirely. With this approach, you declare the part obsolete. This makes sense if there are no other parent assemblies that use the specific part; if there are no outstanding demands for that specific service part; and if top management is willing to accept the costs of writing off obsolete inventory. A major reason why more firms don’t do this is because of concerns over who will bear the resulting costs.

Transferring the responsibility for slow movers from production and inventory control to a supplier or to marketing is another tactic. When you transfer to a supplier, the supplier assumes responsibility to provide sufficient availability. In this sense, the item has now become a vendor managed inventory (VMI) item. When the item is transferred out, the costs are converted from overhead to variable, and the demand for internal space generated by that item is eliminated. If marketing or some other group insists on stocking a slow mover, an option is to make that group responsible for stocking and managing the component.

Another tactic for slow movers is to redesign another component so it can be easily adapted to provide the same production functionality of the component you seek to eliminate. This strategy has long been used in the white appliance industry (firms that manufacture dishwashers, washing machines, ovens, etc.).

Red-tagging, anotyher strategy, is commonly associated with the ”5 S” program frequently found in Kaizen events in which all unnecessary items are identified and labelled with a red tag.  The goal is to flag items so they can be easily and quickly moved out, which puts you in a better position to organize the remaining necessary items. Tagged items are moved to a separate area. A red tag – which contains information such as part number, location, and time last used – is left in the items’ place in the main stockroom.

Typically, if the part is needed, the red tag is pulled and given to someone in inventory control, who retrieves the part from the secondary location. This demand provides evidence the part is still needed and shouldn’t be disposed. But if after some predetermined period of time, the part has generated no demand, yoou can eliminate the physical stocks. However, keep the drawings, item master information, and any other necessary data on the item so the part can be built again should the need arise.

The final tactic is the default strategy – keeping the part in stock and accepting the inherent benefits (and costs).

These various strategies provide a more structured and comprehensive process for dealing with the slowest movers. Ideally, by eliminating slow movers, you potentially can reduce the number of parts you must control, which translates to lower costs, fewer resource needs, and simpler systems – a true win-win situation.

• While working at a large multinational conglomerate, I saw management approve and build a multimillion-dollar chemical storage facility. It was state-of-the-art, and it met every Safety, Health and Environmental (SHE) requirement. But it shouldn’t have been built. It would have been better to have the chemicals delivered directly to the line on a Just_in-Time (JIT) basis.
• A large medical electronics firm had eliminated 90% of its parts and subassembly warehouse by implementing JIT. But this same firm maintained several distribution centers stocking spare parts and subassemblies because it was critical for their customers to have spare parts available on an emergency basis.

A warehouse is  tool for management to use to meet customer needs. But a tool depends on the user using it appropriately – a hammer can be used to build a beautiful house or smash a finger. Management must carefully think throough the cost/benefit decision for putting in a warehouse. Finally, building a warehouse is both a tactical and strategic decision.

An example is a large supplier of parts to the equipment and truck industry. The company’s US plant was in California, with feeder plants in Mexico and Ireland. Suppliers were in the Midwest and the Southwest. The customers and assembly plants were in the Midwest. The plant built and delivered several thousand assemblies daily.

The company’s senior management had committed to 24-hour delivery on a JIT basis. The problem was that the physical layout of the process couldn’t support it, due to the following conditions:

• Delivery time of raw material castings took two to three days by truck
• Fabrication and assembly in the plant took two to three days
• Delivery to the customer took two to three days by truck
• Air freight was out of the question because of the weight of the product

Another complication was that the forecasts from marketing never matched the actual orders coming in from the customer. The plant was adjusting the schedule daily.

However, it was doing quite well by most standards. Quality was excellent, costs were under control, and they were meeting the schedule 95% of the time. But the customer was still not satisfied – 95% isn’t good enough in a JIT situation.

The company considered installing a new ERP planning system because management believed the problem was in the forecasting, master scheduling, and shop scheduling areas. My analysis brought me to a different conclusion: Solve the problem by putting in two warehouses, one for raw materials and the other for finished goods, as follows:

• Set up one warehouse across from the plant to consolidate all supplier raw materials. It would carry no more than three to five days’ worth of parts, delivered to the plant on a daily JIT basis. The warehouse would be run by a logistics company jointly contracted by the suppliers and the assembler, and the company would not be charged until the materials was delivered to the plant.
• Set up a second warehouse across from the plant to house three to five days’ worth of finished goods delivered daily to the customer’s assembly plant. Again, the customer woould not pay until the material was delivered to the plant.

The decision for the two warehouses was based on physical processes – shipping material across the country. An alternative would be to relocate the plant and its suppliers near the customers. However, senior management rebuffed this idea.

Once the decision is made to have a warehouse, a state-of-the-art, competitive operation must be put in. The proper layout, equipment, and personnel must be used. Attention to detail and willingness to spend money, especially on people, is critical.

So, warehouses are still necessary in today’s JIT world. Where and when they are used is a combination of long-term strategy and daily operations necessity. Putting them in takes detailed planning and a commitment to training and personnel development. When done correctly, warehouses give an organization flexibility and increased profit; when done poorly, they simply cost a lot of money.

Finance is more interested in dollar-based measures of inventory. One example is the end-of-year total dollar investment in inventory, which is useful for creating financial statements. In today’s lean production environment, however, the finance department also may want to determine the inventory asset’s level of productivity. The formula for inventory turnover is (=Cost of Goods Sold/Average Annual Inventory Investment). It is an indicator of how well inventory is being used by a business. How many dollars of sales, at cost, are being supported by each dollar of inventory? That is what the formula tells you. Higher ratios are considered better, but this can be overdone in any given situation.

However, purely dollar-based measures of inventory are not particularly useful to operations. A customer pays a bill in dollars but buys specific items. From an operational perspective, items must be planned and controlled to match supply and demand. One measure of inventory at the item level is units on hand. This yields unambiguous quantity information item by item, which is useful for planning and control purposes. But it does not reveal whether the amount on hand is an appropriate amount. For that, you need a yardstick of some sort.

Traditionally, an appropriate amount was established by using independent demand inventory methods, such as Order Point/Order Quantity systems. But these methods failed to anticipate future demand and didn;t coordinate the availability of related items needed for joint use, for example, assembly.

Dependent demand planning methods, such as MRP, addressed both of these shortcomings by coordinating the planning of quantity and timing for related items and by driving that planning from known and projected requirements. With realistic lead times and realistic forecasts, the resulting inventories should have been “optimal” for the circumstances. Lack of realism in these areas, however, undermined the operation of MRP systems, yielding less-than-desired service and more-than-desired inventory.

Days of supply is an example of a time-supply measure of inventory. A common use of time-supply measures in inventory planning systems is to reduce the risks of excess and obsolete inventory by placing an upper limit on the time-supply of an item that can be stocked. One rule-of-thumb is “no more than one-year supply of C-items.”

Days supply could be calculated by inverting the inventory turnover figure and adjusting for units of measure. For example, a turnover of 5 (times per year) would be equivalent to a time-supply of 1/5 year or 1/5*365=73 days supply.  However please note that the turnover ratio is based on the cost of sales for the past year and on the average annual inventory investment in dollars. Aggregate dollars and a historical view aren’t very useful to operations, which needs to match supply and demand of specific items in future.

Days supply shoould be calculated at the item level, based on inventory currently on hand in units vs, known requirements and forecast demand in units per day for a specified period:

Days Supply= Inventory Currently On Hand/(Known Requirements+Forecast Demand) in Units/Day

Because time-supply and turnover are inversely related, the above result coould be inverted to project an inventory turnover figure for the future, which could be based on units not dollars. Generally, smaller days supply figures are considered indicative of a leaner, more productive use of inventory, but  again this can be carried too far. Fragile systems have “crashed” for lack of supply e.g. auto industry strikes at supplying plants shut down assembly plants rather quickly if there is not much buffer.

After the annual shutdown, a group of concerned employees was waiting for me in my office. The buyer informed me that MRP failed to generate the requirements for the new product and suggested MRP “may work for some products but just doesn’t work for ours.” One of the planners also explained that MRP had generated requirements for old part numbers but the newly created part numbers were missing from the MRP run.

“Are you certain you loaded these new numbers into the part master?” I asked the planner. Without a word, she handed me the part master maintenance log for the last workday before the annual shutdown, which showed that all the new part numbers were loaded properly. Perhaps we entered the wrong buyer code on these parts or perhaps purchasing failed to load any buyer code at all,” I said. But the planner handed me the maintenance record for the item vendor file with all the buyer codes highlighted. “I entered them myself because I was afraid purchasing would forget,” she explained.

I had one more possible explanation for the missing requirements. “Did we fail to load a lead time?” I asked the group. “A blank in the lead time field functions as a zero, and MRP will tell us to order a part in the same time period as is required if no lead time is loaded.” The planner held out another piece of paper to prove the lead times were loaded. She also assured me the dates in the master schedule and MRP were in sync and every data element she knew to check were all loaded correctly.

Far in the back of my mind, I struggled with another explanation, something I had ome across years before. But my memory was fuzzy.

“Given how rushed we were to begin our annual vacations, I’m surprised all the data got loaded properly,” said the IT Manager.

“Describe the daily MRP run,” I asked eagerly.

“We run MRP on third shift after all the second shift transactions are completed,” he explained. “After the preliminary jobs, we launch the MRP run itself, and it usually takes about four hours.”

He then described a series of preliminary jobs that updated the data MRP needed to function. Because these jobs were launched by a computer operator in a predetermined sequence, I suspected that our lone third shift computer operator, the last person to start his annual vacation, had taken a shortcut.

The IT Manager completed his list of preliminary jobs. “After updating effective dates for engineering changes, we run the low level calculation,” he explained.

“That’s it!” I said, “I’ll bet the missing parts have no low-level circulation. The field is blank; telling MRP not to search for requirements because they don’t appear on any level BOM.”

“I suppose it would work that way if a part ended up with no low-level calculations.” said the IT Manager. “But why would the program fail on just the new part numbers?” he asked.

“Because we didn’t run the program the last time we ran MRP,” I replied. “Our third shift operator dropped it to get a jump on his holiday.”

“But if he hadn’t run this preliminary program, why did MRP generate requirements for anyhting?” asked the buyer. “Why aren’t all parts missing requirements?”

“Because if you fail to run the program, it will use whatever number it has from the time before,” the IT Manager answered. “But for these brand new part numbers, there was no time before. This scenario would seem to fit the facts.”

He began searhing the computer files for confirmation, and soon announced, “I’ve checked the job log for the last day before the annual shutdown, and the low level calculation program was not run.” The mystery was solved.

“So does this mean that I should just dump today’s MRP output?” the buyer asked. “No,” I replied. “Your output is correct for the part numbers it contains. It’s just missinga few. The missing ones will be there tomorrow, right?” I asked, looking at the IT Manager. The others filed out of my office.

“Right,” he replied and added, “If there are no new BOMs loaded to cchanges to existing ones, you can drop the low-level calculation without affecting MRP.”

“Of course,” I replied. “I’m sure that’s what our third shift operator was counting on. He didn’t figure on BOM maintenance happening the last day before the annual shutdown.”

As he left, I realized I had gained an ally. The inventory planning group had always supported me and now IT was behind me, too. You never know how alliances will be forged. When people are involved, you just never know.