Proper inventory controls are critically important to virtually any business, but especially so to ventures that invest substantially in tangible merchandise. Inventory management software has eliminated many of the errors that were historically associated with inventory management activities. However, weak links remain in the chain, and the weakest of all is the human element.
First off, taking inventory is oftentimes loathed by the individuals this responsibility is forced upon. Many enterprises don’t establish routine cycle counts but rather adhere to a longer-period count cycle. Inventory management employees don’t necessarily think of counts as part of their core responsibilities. We’ve all witnessed it at some point, someone half asleep fumbling through their duty with a clip board and needing a coffee refill. Lackadaisically counting while mentally off in another world.
A few small miscalculations, a little underestimating, a few skipped recounts, and the numbers end up terminally skewed. Inventory counts are only as strong and accurate as the individuals performing the counts. And unfortunately for businesses, sometimes the links only get weaker the closer they get to upper management.
Many of the costliest mistakes made in inventory control can come from human errors made at the managerial level. Failure to appropriately identify and react to cycle count variances is simply inexcusable. All discrepancies should be analyzed upon detection and proper follow-throughs should be taken. Beyond management overseeing (or rather failing to appropriately oversee) physical inventory counts, mistakes often involve misanalysed captured data.
Captured data is used to determine restocking levels and to identify stagnant inventory. Stagnant inventory will eventually turn into what accountants refer to as spoilage and will result in lots of red ink. Furthermore a shortage of restocking leaves store shelves barren of products and results in clients fleeing to competitors. “Line managers” either need to appropriately analyze the inventory management system information or companies need to purchase technological systems capable of alerting them of such situations.
Executive Managements’ Role
This is where senior management comes into play; it is often their passive role in inventory control that causes so many problems to begin with. Lack of a formal training regiment, failure to invest in new technologies, inability to react to information that suggests the systems or processes are failing can all be traced to upper management.
A proactive senior leader involved in the inventory control process on the other hand will identify problems and initiate a root cause analysis. They will take steps to proactively execute a training program, to replace under-performing personnel or to adjust the automated system inputs to correct for false assumptions (such as poor lead time estimates). Executive leaders should ensure that all automated systems are implemented appropriately and that personnel are adequately trained and monitored to ensure the system is being operated as intended.
Minimizing Human Interaction
The best systems of course are the ones that limit or completely eliminate the human element from the inventory equation. Radio frequency methods of inventory control (RFID) can be broken down into two categories which are described as active and passive systems.
The passive method requires the use of hand held devices that have limited range and involve the human element. This method is still more accurate than many others but the best radio frequency systems are the active systems. With active systems anytime an item is moved its radio frequency is picked up automatically and its information is recorded in a monitored database. As long as an item was originally fixed with a radio frequency tag the system will know where everything is and how long it’s been there.
This is essential for eliminating obsolete inventory and spoilage as well as streamlining an automated restocking system. Albeit, RFID systems are relatively expensive compared to barcode or other more manually based systems Companies must perform robust cost benefit analyses to determine whether these systems would generate a return on investment. Unfortunately, even these highly automated systems are prone to human error if the operators misanalyse results or workers incorrectly tag items.
Barcode systems are currently the most popular system used for inventory control. Barcode systems are cheap in comparison to radio frequency systems but involve more human engagement. Human error is much more prevalent with this type of system. Improperly managed inventory control using the barcode method can drown profit margins in the long run (as of course will a system that just involves nothing more than a clip board and a number two pencil).
Regardless of the system employed, the weakest link in inventory control needs to be monitored, maintained, and trained to maximize effectiveness and minimize loss.
This article was written by Phillip Reeves for RedBeam, Inc. a leading provider of complete barcode-based software solutions. Their inventory control software is intuitive, affordable and provides a complete solution for your inventory management needs.