Factors affecting Inventory Operations

Inventory management operations are increasingly being outsourced to third party service providers, thereby ensuring that the investments and costs in managing the inventories are reduced. This is a welcome trend provided the company’s focus on overseeing and reviewing both inventory management as well as inventory operations periodically to ensure proper controls are maintained and processes followed.

Inventory management entails study of data on movement of inventory, its demand pattern, supply cycles, sales cycles etc. Active management calls for continuous analysis and management of inventory items to target at lean m inventory Management.

Inventory Management function is carried out by the inventory planners in the company in close co ordination with procurement, supply chain logistics and finance, besides marketing departments.

The efficiencies of inventory management are largely dependent upon the skills and knowledge of the inventory planners, the focus and involvement of management and the management policies coupled with the inventory management system.

However inventory operations management is not under the control of the inventory management team but rests with the third party service providers. In this section of the article we aim to uncover few of the critical areas and action points on the part of operations that can impact the inventory of the company.

1. Unskilled Labor and Staff: Inventory operations management is a process-oriented operation. Every task and action required to be carried out by the operatives will impact the inventory as well as the delivery lead times and other parameters. Therefore knowledge of what one is required to do and the effect of the action should be known to the operatives who are on the shop floor. For Example: If an operative is given a put away task, he should know how and where he should put away the pallet, how to scan the pallet ID and confirm it back to the system. Besides he should also know the impact of not completing any of these actions or doing some thing wrong. The impact his action will have on the system as well as physical inventory should be clear to the operative.

Secondly different inventory items would have to be handled differently. Operatives who are carrying out the task should know why and what is required to be done. They should also know the consequences of not following the process. A pallet might have to be scanned for the pallet id and put away on a floor location, while a carton might have to be opened and scanned for individual boxes inside and put away into a bin. The operatives should be trained on the entire process and understand why and what he is doing.

The WMS systems are quite operational and task intensive. Where the warehouses are being managed on RF based systems, the operatives should be able to manage the RF readers, understand how to access and complete transactions through the RF Guns.

Often it is noticed that when the warehouse operations are being managed by a third party service provider and the principle customer is not present at the location, the quality of staff and operatives is compromised and people are not given adequate training before being allocated their responsibility. Such situations can lead to inventory discrepancies.

2. In adequate SOP, Training and emphasis on processes compliance: When a inventory management project kicks off at a third party warehouse location, both the principle customer as well as the third party service provider work on the project and setup basic processes, document them in Standard Operating Procedures and conduct training as a part of the project management methodology.

However over a period of time, the nature of business requirements changes, resulting in change in the operating processes. These do not get documented in terms of amendments and the SOPs become outdated. Thereafter one finds that the new comers who are introduced on the shop floor are required to learn the processes by working along with others where as no training or SOP document is provided to him for reference. With the result they often have half-baked knowledge of the processes and carry on tasks not knowing why they are doing and what they are required to do.

This situation is very dangerous for the health of the inventory and it shows slackness in the attitude of the third party service provider. Continuation of such a situation will lead to bad housekeeping, inventory mismatches, discrepancies and also affect the service delivery. If left unchecked can lead to theft, pilferage and misuse of inventory.

In any third party owned inventory operations warehouse, the principle client should ensure that periodic review and training is conducted for all staff. Inventory operations should be periodically reviewed and inventory counts and audits carried out regularly.