John Hughes - Operations leadership

Simple Warehouse location and count

principles

John Hughes - Operations leadership

Your stockroom…

• Does it have locations identified?

• How do you account for withdrawals and receipts?

• How do you verify your stock balances?

I recently worked in a business that made to order with 4 stock rooms and a hybrid computerised / manual stock management system c. 200 SKUsUnsurprisingly it was a mess!I couldn’t do much about the stockrooms themselves, but the approach to stock management could be improved by introducing some order and structure.

Here’s what I did…

John Hughes - Operations leadership

1. Get the stock in the right place.

Simple lean principles will define that the closer you can get stock to the point of use the more efficient your operation will be.

Organise your stockroom so that the high frequency used parts are closest to the cell in which they are to be used.

Typically 80% of your activity will use 20% of your parts. Make that 20% count by locating the stock nearest to the point of use.

Manufacturing Cell

D

A

B

C

John Hughes - Operations leadership

1. Identify your stock locations

4 store locations:Area AArea BArea C (in another building)Area D

Manufacturing Cell

D

A

B

C

John Hughes - Operations leadership

2. Identify each rack, each shelf and position on shelf

Area ARack 1Top Shelf A1-12nd Shelf A1-23rd Shelf A1-34th Shelf A1-4

Depending on the size of the parts to be stocked will influence how many bins might fit horizontally on each shelf.I went with 6 locations (relatively small parts)

So component xyz would be found on A1-1-5. The fifth position on the top shelf.

John Hughes - Operations leadership

3. Record where your stock is

If your computerised stock management has the functionality to add in a warehouse location use the tool.

We had a hybrid computer / manual system that used MS Excel sheets and manual data input to update the master record (no issue to works order functionality). Create stock sheets for each stock area / shelf unit.

John Hughes - Operations leadership

4. Count your stock

The company had a weekly stock check in place which involved collecting the quantity of each component by reading off a component specific sheet (located with the stock item) and entering that number onto a master stock sheet that was ordered alphabetically.

Each component stock sheet was updated in real time, manually. E.G. an operator takes 6 components ‘abc’ from the storeroom, the component specific sheet was updated to show -6 and new stock quantity.

I had to continue to use the manual real time update to stock quantity but I moved to cycle counting. 1 area each week. All stock in that location to be physically counted and component specific stock sheets updated and verified by signature.

John Hughes - Operations leadership

5. Use a process

Document the process for receiving stock from vendors

Document the process for issuing stock to manufacturing

Document the process by which physical stock will be verified and the frequency of count.

Train your employees to use the process

Review your processes to check that they 1) deliver the required output and 2) they are still relevant for the operation.

John Hughes - Operations leadership

6. Measure your performance

Stock accuracy is usually measured using:• Line item numerical varianceIf you counted 100 stock lines and 10 items were incorrect when measured against the master record. Your stock accuracy would be 90%

• Value variancePhysical stock may be gained or lost against the master record. (You might have more or less stock than you thought.) The net balance will affect the company’s stock valuation and will be the number that the Finance guys will be interested in.

John Hughes - Operations leadership

7. Continual Improvement

What do the numbers say?

Line item stock accuracy33%

Target 98%

Stock value variance (year end stock count, 100% items) £50,000Target < £1,000 Practical improvement opportunities:• Issue tablets to staff for direct input of

count figures and remove double input• Software modification to electronically

issue and record stock to works order to remove human steps from the process.

• Communicate to staff so that they can see the trends