Physical Inventory and Warehouse Management

1. Physical Inventory and Warehouse Management Chapter 12

2. Warehouse Functions • Provide timely customer service • Keep track of items • Minimize physical effort and goods moving costs • Provide a communication link with customer

3. Pick goods Marshall the shipment Dispatch the shipment Operate an Information System Warehouse Activities • Receive goods • Identify goods (SKU or P/N) • Dispatch goods • Hold goods

4. Maximize Productivity & Minimize Cost • Maximum use of space • Space is usually the largest capital cost • Efficient use of labor • The largest operating cost • Efficient use of equipment • Equipment is usually the second largest capital cost

5. Cube Utilization & Accessibility • Factors influencing effective use of warehouses • Cube utilization and accessibility • Stock location • Order picking and assembly

6. Pallet Position Example • Cube utilization and accessibility • Goods stored on floor and in racks above to utilize all available space • Accessibility means being able to get at the goods wanted with minimal effort

7. Stock Locations • Stock Location • Items grouped functionally • Items grouped by sales volume (fast-moving together) • Items grouped by similarity (i.e. size, container, special storage requirements, etc.) • Separate working stock and safety stock

8. Stock Locations • Fixed location • Floating location • Point-of-use storage (POUS) • Close to where it’s needed • Found in JIT and lean environments • Central storage • Inventory contained in central location (Tool cribs)

9. Storage Racks (Special Handling)

10. Storage Racks (Central & Narrow Aisle)

11. Storage Racks (Cube Utilization)

12. Order Picking Systems • Area • Zone • Multi-Order

13. Area Picking

14. Zone Picking Line

15. Multi-order system

16. Inventory Record Accuracy • Accurate inventory records enable firms to: • Operate effective materials management systems • Maintain satisfactory customer service • Operate effectively & efficiently • Analyze inventory

17. Inventory Record Accuracy • Inaccurate inventory records will result in: • Lost sales, shortages, & disrupted schedules • Excess inventory (of the wrong things) • Ineffective MRP / MRPII / ERP

18. Inventory Record Accuracy • Causes of Inaccuracy • Unauthorized withdrawal of material • Unsecured stockrooms • Poorly trained personnel • Inaccurate transaction recording • Poor transaction recording system • Lack of audit capability

19. Inventory Record Accuracy • Measuring Inventory Record Accuracy • 100% is not practical • Tolerance • Permissible variation (record vs count) • Set based on • Unit value • Criticality • Availability • Lead Time • Etc.

20. Auditing Inventory Records • Periodic Counts (typically annual) • Process 1. Count items & record count on a ticket 2. Verify count by recounting or sampling 3. When verification is finished, collect tickets and list items in each department 4. Reconcile inventory records for differences (physical count vs inventory dollars)

21. Auditing Inventory Records • Cycle Counts • Takes place throughout the year • Advantages • Timely detection and correction of errors • Complete or partial reduction of lost production • Uses personnel trained & dedicated therefore minimizing “once-a-year” errors • Count Frequency • Number of times item is counted annually

22. Cycle Counting Methods • ABC Method • Based upon part activity, Reference Chapter 10 • Zone Method • Typically employed on fixed location or WIP inventory • Location Audit System • Typically used in floating inventory settings