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Ask the Expert - The right count

Question:

I work as an industrial engineer and am leading an improvement that changes our strategy for product fulfillment from what we produce to how much we produce to where and how we inventory the finished goods. One of the goals is to increase our inventory accuracy through the reduction of inventory moves and transactions. Is there any data that supports the idea when your transactions and movements decrease, your inventory accuracy will increase?

Answer:

Inventory accuracy is a measure of how close the inventory records match the physical inventory. This is typically measured in dollars or by count. Applying lean techniques can reduce the need for inventory and reduce transaction volume. This will greatly increase the inventory accuracy but may take some time to reach this point.

There are several ways to improve inventory accuracy. The first is to perform a physical inventory that counts every item, compares the count to inventory and corrects the records as necessary. All normal operations cease for this activity. The next is to perform cycle counting. Cycle counting is a physical count of a small number of items on a set interval. Again, with this technique the physical count is compared to the records, and the records are corrected as necessary. The third way is to use process improvement methods on the transaction process. Finally, the most effective single way to improve inventory accuracy is to reduce the number of transactions. Reducing the number of transactions reduces the opportunity for error.

Ideally, you would want to combine all four methods for the most effective method. Using lean thinking, you would want to improve the process so that you could increase the inventory turns.

Elizabeth Cudney, Ph.D. 

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