Ramlee Ibrahim & Associates

Several weeks back, I shared about the physical inventory disaster I witnessed at a Thai company. Here’s how the story ends…

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!