Practical case study using an SME that I worked with. Simple steps to improve stock accuracy. My skills lie in the engine room of your business, I live in the world of business operations. Call me on 07789 517668

1. John Hughes - Operations leadership

2. 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 SKUs
Unsurprisingly 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

3. 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

4. 4 store locations:
Area A
Area B
Area C (in another building)
Area D
Manufacturing Cell
D
A
B
C
John Hughes - Operations leadership

5. Area A
Rack 1
Top Shelf A1-1
2nd Shelf A1-2
3rd Shelf A1-3
4th 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

6. 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

7. 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

8. 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

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

10. What do the numbers say?
Line item stock accuracy
33%
Target 98%
Stock value variance (year end stock
count, 100% items)
£50,000
Target < £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
John Hughes - Operations leadership