Let’s take a quick look at how good your organization is at warehousing today and one process that can revolutionize your operation.
A good way to assess your current warehouse performance is to look at the Key Performance Indicators (KPIs). Best in class warehouse operators will have a whole range of KPI’s covering customer service, productivity, costs, inventory, people and processes. They will have a KPI hierarchy starting at the top of the pyramid with those of most interest to senior executives, including warehouse cost per unit and stock availability %. These will be supported by a whole raft of more detailed operational KPIs including pick rates, dock to stock time, damage rates, absence, order backlog to name but a few.
Warehouse operating costs and customer service KPIs are important but the significance of another KPI is frequently overlooked.
Stock accuracy is one of the most important warehouses KPIs, if not the most important! Stock accuracy % is measured by product and compares the actual physical stock of the product in the warehouse with the stock of that product in the system of record (typically the ERP system). Measuring stock accuracy involves periodic physical counts, reconciling physical and systems stock and making necessary adjustments to the system's stock.
In many organizations, physical stock counting and therefore measuring stock accuracy is seen as a “necessary evil” and only done to keep the auditors happy! An annual count might involve stopping warehouse operations for a couple of days then taking a couple of weeks to try to understand why there is a difference between physical stock and systems stock. There is little chance of understanding why stock discrepancies occurred in the distant past and it becomes purely an annual administrative task.
What’s your current stock accuracy %?
Don’t be surprised if it’s less than 95% if you’re only stock counting on an annual basis.
Let’s take a moment to think about the implications of having low stock accuracy in your warehouse:
- Firstly, and most importantly, you are jeopardising customer service by not have products in the warehouse that the system states you have. Your organization is making promises to customers at order capture that you can’t keep!
- The response to poor customer service is often to build more stock which drives up working capital and stock holding costs
- Low stock accuracy reduces warehouse productivity and increases administrative costs. The warehouse needs to investigate stock issues, customer service needs to be informed, the customer contacted and systems/paperwork amended.
All the above problems will be multiplied if your warehouse processes are paper based with limited use of technology.
If your warehouse is failing on stock accuracy don’t despair there is a warehouse process that when implemented successfully will revolutionize your warehouse operation – Cycle Counting (perpetual inventory) It’s not new but to get the full benefits you need to follow 3 simple steps:
- Introduce the cycle counting approach – cycle counting involves physically counting a subset of all the products in the warehouse on a regular basis. Physical counts are then compared with the systems stock and any adjustments actioned. Counting on a regular basis means the cause of discrepancies can be properly investigated and put right quickly. It is usual to set-up a count frequency in the system, whereby fast movers are counted more frequently than slow movers. For example:
- Fast movers (typically 20% of line items) – count monthly
- Medium movers (typically 30% of line items) – count every 3 months
- Slow movers (typically 50% of line items) – count annually
- Cycle counting is a proven way of increasing warehouse stock accuracy in comparison with an annual stock count. However, if the cycle count process is based on paper count sheets, handwritten entries and input of the physical count on a desk-top computer then the full benefits of cycle counting will not be realised. This brings us to the second way in which stock accuracy can be increased by using a modern mobile inventory management application
A Mobile Inventory Management Application – this is a mobile device with an application that links directly into the backend ERP system. Warehouse transactions input on the hand-held device update the ERP in real time. The hand-held device informs the user the bin location of the material to be counted. The bar-code on the material is scanned to confirm it’s the correct product, the product is physically counted and the quantity directly inputs into the hand-held device. The use of a hand-held device does away with the need for paper count sheets, handwritten count quantities and separate entry of the count by someone in the office. This not only speeds up the counting process but reduces data entry errors. The mobile cycle count applications are usually just one component of a mobile warehouse inventory management application, such as, Innovapptive’s mInventory which provides a full range of warehouse functionality including good receipt, picking, packing, goods issue and cycle counting.
As with all processes that rely on technology the human element should not be forgotten. The mobile application should be intuitive, fast and with minimal training required. The application also needs to be role based so users can only access authorized transactions. For example, you don’t want the same person inputting the stock count on the hand-held and doing stock write-offs, that would infringe business controls covering segregation of duties.
Use of mInventory’s cycle count functionality enables companies to drive fast improvements in stock accuracy. Many of our clients have started with the cycle count application as their first step on their journey to a warehouse running on mobile rather than paper. With mInventory in place, you’re well on the road to a best-practice stock accuracy %.
Root Cause Analysis – the third stage to best-practice stock accuracy builds on the foundation of the previous two stages. Once you have an efficient mobile cycle count process in place your staff have the time to investigate stock discrepancies that do occur and resolve the root cause of problems in a timely way. For example, you may have identified that one supplier is a source of stock discrepancies. You highlight the problem with the supplier and agree more detailed checks for that supplier with your goods receipt staff and after a few weeks the problem is overcome.
With warehouse cycle counting in place underpinned by a robust and flexible mobile application and a focus on root cause analysis, there’s no reason why your stock count accuracy should not exceed 99%. Stock accuracy is one of the most important KPIs and informs you if all processes are working properly and that staffs are operating a professional warehouse operation. Cycle counting really can revolutionize your warehouse operation!
If you would like a demo of Innovapptive’s mInventory(Mobile Inventory and Warehouse Management) solution, please click on the link. Alternatively, if you would like to discuss with an Innovapptive solution expert, you can reach out to us by emailing us at email@example.com or you can reach a sales representative at (713) 275-1804.