Maybe it was the latest cycle count, the picking errors report, the reorganization of the warehouse, or the procurement staff that brought it to your attention. But you've got less of what you thought you had and more of what you didn't think you had. This drives the purchasing people crazy.

The first thing you do? Install cameras and security to stop what you believe is theft, or to give the warehouse people grief because you believe they're not doing their job. It’s the path of least resistance. Well I'm here to tell you that not all inventory shrink is the result of product walking out the door and not all pickup is the result of poor performance at the warehouse level.

 

Here are just a few of the 65 reasons that inventory counts don't tell you what you want to hear.

 

Make it a point to train your staff in the best practices of product identification. For example, keep your units of measure to no more than three positions all in upper case. Each would be EA, package would be PK, and box would be BX. Also keep the units of measure to a reasonable number. I like to use ten as my limit. Package and pack would both be PK. Although it is a challenge to find the time to train properly, and to develop the database structure models, remember that you’re managing your second most important asset.

 

Automate the entry process wherever possible. Consider utilizing barcode technology to reduce your exposure. Studies have shown that a competent typist will make one entry error for every 300 keystrokes. Barcode scanning yields a read — call it data entry — error rate of 1 in 1 million. Wedge scanners introduced into the receipt process will not only eliminate many data entry errors — serial numbers and lot numbers as an example — they will enable product identification to be much more accurate. Picking verification on the outbound side will provide the same benefits. 

If you're hand keying serial and lot numbers, then you may want to consider stepping into the 21 century. We've got some pretty cool technology over here.

 

Bin locations are essential to tracking your inventory from receipt to shipment. But be sure you deploy bin logic in the right way. For example, always allow a random multiple bin matrix. Many distributors are leery of using bin locations because they feel it will disrupt how they do business. But you can’t find it if you don’t know where it is. 

For example, many distributors or retailers start out with a few small manageable vendor lines. They place all the items in vendor line by product number order in the storage media. Over time they add more lines and their existing lines continue to grow. There is no longer room in a vendor section for the entire product offering so items spill over into the next aisle. As new items are introduced they play musical chairs with the product to maintain an item number sequence. It gets messy real quick. 

There is a better way. Introduce bin location into your operation. Many of the distributors with whom I talk think that you have to run a large distribution center before bin locations are beneficial. This is not true. Heck, you use bin locations at home for your food products. Bin locations have no boundaries and are always beneficial regardless of your warehouse size or inventory mix, because they introduce an extra level of control and provide you with added flexibility. Never make the part number and bin number the same value.

 

You might as well call this lost inventory as you’ll have a hard time selling it as well as finding it. Chances are that you stick it in the back corner of your facility. A fair amount of internal damage occurs because of poor materials management skills. You don't set 100-pound boxes of nails on the top of boxes of light bulbs. 

There are also some inexperienced or just don't care forklift drivers. While many of you are already in compliance with the Occupation Safety and Health Administration (OSHA) guidelines on forklift training, getting your staff up to speed on forklift operation will go a long way towards reducing internal damage. 

 

Please encourage your people to report damage. Accidents happen. Fear has never been a great enabler. Your job is to reduce exposure and to create an environment that enables. 

Remember that you reap what you sow. Tend to your crop with best practices and technology in mind and enjoy efficiency, customer service improvements, and profit as the result. 

 

Dan Belanger is the president of the Belanger Technology and Consulting Group. His background includes 30 years of solution based action in multiple business models including distribution, manufacturing, warehousing, facilities management, service, retail, and information systems. He is well-versed in all aspects of business ownership, operations, and management.

Contact Dan at 702-785-7331 or dan@danbtg.com. Visit www.beltechgroupinc.com and www.linkedin.com/in/belangerdan/ for more information.