HOW TO ACHIEVE INVENTORY ACCURACY CLOSE TO 100%
A WMS Driven Cycle County Program Should Get You There
Steve Hunyar – Chief Solutions Office/EDGE
11/30/2021
In 1986, Motorola announced their 6-Sigma program to reduce process errors to an incredible 3.4 errors per million, and that included inventory accuracy. I clearly remember many writers in the Material Handling Industry calling this program “ambitious” and “unattainable” and “an interesting goal”. Without unrealistic and cost-prohibitive investments in automation, almost everyone thought this was a pipe dream. Undeterred, Motorola went on to prove the naysayers wrong and within a decade had achieved 6-sigma accuracy in many of their operations – manufacturing and distribution.
Much of their success used mechanized automation, however in the distribution world, they also drove fledgling Warehouse Management Systems (WMS) companies to develop software which incorporated enhanced inventory accuracy techniques. Many of these major software innovations forever changed rudimentary cycle counting programs into what we see today – a highly effective set of algorithms designed to optimize operations while simultaneously driving inventory accuracy into the stratosphere.
Through a combination of mechanization, software, and new labor methodologies, Motorola proved to the world that was once thought of us impossible, was quite realistic – inventory accuracy at an unprecedented 100%.
Thanks to those visionaries, the bottom line is that almost anyone can now reach the goal. But, here is the catch. If you do this the old fashioned way of counting every part every year, often multiple times, it is going to be very labor intensive and costly. Many organizations shut down operations for a weekend and spend thousands of dollars in overtime to complete an annual physical audit of their inventory.
Is this a necessary evil? The answer is almost always a resounding yes. You must know how much product you have and where you have it.
The good news is that a properly designed/implemented Warehouse Management System (WMS) will save you most of the aggravation and cost. The WMS utilizes “count-as-you-go” algorithms to identify errors on-the-fly and automatically notify warehouse management personnel that there are inventory accuracy issues that need to be dealt with.
As evidence, let’s look at an example using real-time tablet technology. A picker is directed by their tablet to a specific location to pick 8 of a specific part. When arriving, the operator finds there are only 7 of that part available and enters the discrepancy into the tablet – immediately updating the inventory status. In most cases, the WMS will perform two operations. The first is to direct the operator to another location to finish picking the line item and complete the order (if that is their business logic in that specific warehouse). The second is to flag the discrepancy for a cycle count which will likely be performed at a later time by different personnel. You can see the short term and long term advantages in terms of order and inventory accuracy
There are many more inventory accuracy processes inherent in a WMS with a proper cycle count system. Below is a partial list of the different options. Your WMS should have options to count by:
- Part Numbers/SKUs.
- Specifiable zones/locations.
- ABC codes.
- Discrepancies (discussed above).
- Value.
- Velocity/frequency – needed when you have a few very high velocity items.
- Zero bin balance – when a location is emptied during a pick. We call this a “free” count.
- Minimum bin balance – each time a location hits a specific minimum amount.
- Touches – number of times the product has been (picked, putaway, etc.). This is particularly valuable for extremely expensive items, or items that have a high rate of theft.
- Automation Counts – (e.g. for a Pick-to-Light System – light up all storage location displays and confirm quantities locally).
A valuable count program can also help you to make decisions regarding the movement of product in/out of high velocity areas. This is particularly valuable for operations that are highly seasonal in nature.
In addition, your WMS should have the ability to intermingle counts with picks/putaways. For example, a warehouse picker may be performing 20 picks in a specific sequence that has an optimized route. They may be directed to count 3 storage locations during the course of completing the pick sequence. That ongoing counting regimen is a simple method to ensure inventory accuracy.
Lastly, if an abnormal number of discrepancies are found over the course of your count program, the warehouse manager has a larger inventory accuracy problem that needs to be identified and fixed. The WMS will be instrumental in identifying the root cause of the problem.
Real-time and accurate knowledge of your inventory is critical in today’s omnichannel supply chain market. It is completely reasonable to expect near 100% inventory accuracy with a good WMS in place. And you should expect to eliminate or reduce the number of full physical audits of your inventory.
During my 40 year career in this industry, I have consistently heard the same gripes from Warehouse Managers, IT Managers, Owners, C-Level Execs, etc., as it relates to the storage and distribution of product. One of those major gripes is inventory accuracy and the need for routine/annual physical audits. Routine physical audits are avoidable, or at a minimum, the frequency dramatically reduced. Implementing a WMS driven cycle counting program will ultimately cut costs and probably eliminate those pesky physical audits.
And yes, I used the word “pesky”.
