Choosing the inventory management best suited to your culture.
By David Miller
Keeping your business supplied with consumables and MRO parts is a necessary component of doing business. It is not something you necessarily have to devote too much attention to if you do not want to, but the less organized you are about it, the more interesting life can become.
By interesting, I mean wasted hours spent scouring your facility to find the item you need when you can least afford the time to do so, and unscheduled trips to the store to buy an item that nobody seemed to notice was running low. To this, add the burden of dealing with surpluses of items that were brought in through misbegotten circumstances, leaving you with a 15-year supply of five XL safety vests, among other white elephants.
I am sure you have run across the odd manager whose skill set is perfectly suited to running a tight ship, but what about the rest of us? It is important to recognize that an effective inventory management program comes in many different forms and having a realistic assessment of your team and your culture is the key to choosing the form that will be most beneficial for your situation. It is also a good idea to be aware that any major changes you make are likely to be disruptive in the short run, and that you should be willing to give any change some time to prove itself.
VMI vs. CMI
If your situation closely matches the scenario described and you have little optimism that it will ever change, the best choice for you would be to delegate the whole thing to your supplier. This is what is known as vendor-managed inventory (VMI). The classic version of this model involves your supplier’s representative making regularly scheduled visits to your storerooms, counting stock levels, and placing orders on your behalf to replenish your bins on the next visit.
If you have more confidence in your team’s abilities and like the freedom that comes with calling the shots, you will gravitate more towards a self-managed model, which is often called customer-managed inventory (CMI).
There are trade-offs inherent in each of these models. VMI frees you from responsibility, but it costs more, and usually obligates you to buy exclusively from the vendor providing the service. You will still have to police your supplier’s rep to make sure he does not abuse your trust and start “stuffing” your bins with excess inventory as a means of padding their commission. Assuming your vendor is honest and competent, this method is still more cost-effective than the unmanaged scenario.
CMI can save you a lot of money if you are disciplined in your management, and you are not obliged to buy everything from the same supplier. The trade-off is that you do have to put in the time to keep your storeroom organized and keep count of inventory levels.
Inventory Management and the Internet of Things
There are many variations on these models, and the last few decades has brought a raft of innovation, thanks to technology. The most visible of these innovations is vending. Vending brings advantages not possible with a manual supply system. You suddenly have an accurate real-time count of your inventory that is updated “in the cloud” every time something is dispensed. Consumables like gloves or other PPE experience a noticeable decline in consumption by controlling both shrink and frivolous use. Team members instinctively cut back on their consumption because they are no longer anonymous when they punch in their unique passcode to access the items they are using.
With automated inventory counts comes enhanced reporting. You can pull usage reports and see consumption history. Knowledge is power; access to this data on a granular level allows you to forecast needs and spot trouble areas with more precision than ever before.
Also significant is the programmable min/max settings that will trigger purchases of items before you run out of them. This greatly reduces the incidence of emergency supply runs, and most of us can agree that that kind of excitement is a thrill we can live without.
Limitations of Vending
Vending is considered a form of VMI, and the downsides of VMI apply here. The machines are costly, and most users opt to have the machines provided by the supplier in exchange for a minimum purchase agreement. Not only will you be required to meet your side of that agreement, but you will not be afforded the option of having the machines dispensing items from sources other than the supplier you have contracted with.
This brings to light one more consideration for users contemplating a VMI scenario: There will likely be parts or inventory that you want to bring in outside of your contract with your principal vendor. Either they do not offer what you need, or they are wildly uncompetitive on some things. So, you find a better source and bring it in on your own. You will want to ask who is going to be managing that foreign inventory?
Other limitations to the classic vending model are the number of items you can vend. The typical vending machine is the coil-style format like machines that dispense candy and chips. These work great for dispensing gloves and other items that can be individually packaged in compact, vendable forms. The number of slots available determines the number of SKUs you can dispense. Keep in mind each size of glove will require its own slot.
Larger format items require a locker-style of machine, akin to what you might find at a home improvement superstore that has an automated propane tank exchange system. Each locker contains one item; each locker is secured by a door with an electronic lock that unlocks when the proper credentials are supplied.
The CMI world has a variety of approaches that borrow from the benefits of vending. The use of bar code readers, weight-sensitive bins, RFID sensors, electronic authentication, and video monitoring have all been employed in pursuit of enriching the self-managed experience. It is now possible to self-manage supplies in a way that allows you the autonomy of the CMI model and still enjoy the real-time inventory status updates, low-stock alerts, reporting, security, and accountability that has made vending such an attractive option. (For one example of a CMI-based inventory system, see the INVENTORY IQ® sidebar) What is required in return? Training and discipline.
Plan the Work and Work the Plan
Any time you attempt to transition from a manual system to a machine-based system, there is an onboarding period that is going to feel at times like flying by the seat of your pants. Management from top to bottom, as well as those who will be interacting with the system, must be willing to suspend their disbelief during this transition and follow the plan. Those steps that do not make sense now will sharpen into focus in short order. An experienced provider will be skilled in training your team and giving you all the help you need to get off to a good start. They will remain in close contact to help you solve issues that come up to ensure you get the full benefit of the system.
Once you are up and running, it will be up to you to put in the effort to keep the system working properly. The more attentive your team is to follow the protocols, the better you can trust that all of the powerful information now at your fingertips can be trusted to be accurate. Once you master the learning curve, your time spent managing the system should not exceed the time you used to spend on your former system, yet the information now available to you will leave you wondering how you ever got along without it.
As new employees are introduced to the system, they need to be trained to use it properly. Special care needs to be given to follow protocol when receiving in new items, returning unused items into stock, and cycle counting on a prescribed schedule to ensure that your inventory counts remain accurate.
In summary, there are as many methods of managing inventory as there are ways to wear your hair, and the best way for your operation to do it can be just as personal. There are clear and powerful benefits from using technology to do it, but only if you are prepared to commit to making it work. | WA
Case Study: INVENTORY IQ®: An Example of IOT-Assisted Inventory Control
To best illustrate what a CMI inventory management system can look like, I will draw on my knowledge working with HUB Industrial Supply’s proprietary Inventory IQ system for the past five years. Since the system is customizable, other users may have features than those described. The example installation is situated in two secured storerooms. One storeroom services the shop and contains spare parts, a hydraulic hose crimper, tools and safety items. The other storeroom services the operations and contains PPE, spill kits, and other items of use to the operations crew. Both rooms are accessible by means of a biometric lock. Unlike a vending machine, there is no finite number of SKUs that can be added to your storeroom. Each team member has been set up as users to one or both storerooms. Some users have been granted a higher permission level than others, giving them access to more features as their roles require. Upon gaining entrance to the shop storeroom, a team member enters the room and picks up a barcode scanner, touching the screen next to her name. Five video cameras begin recording security footage from various angles. The team member picks out a cut-off wheel from a bin and scans the barcode to remove it from the storeroom. She finds an angle grinder on the tool shelf and, using the checkout function, she scans the barcode with the same scanner to “borrow” the grinder. An e-mail is automatically sent to her supervisor notifying him that she has borrowed the grinder. Another e-mail will be sent in 3 days if she fails to return it. She exits the storeroom with her equipment, and the video recording ends.
Although each user is identified by biometric authentication upon entry into the store room and their movements are recorded to video, it is still up to the user to properly record each item they take out with the barcode scanner. This differs from a vending machine experience, where each item taken out is inaccessible until the transaction is recorded. This difference has a number of consequences, both positive and negative, but at minimum it requires training and conscientious discipline of each user. In situations where compliance is difficult due to high rates of turnover, the best practice is to limit access to the storeroom to supervisory team members, who can distribute the needed items to the end user. Fifteen minutes later, a manager logs into the company account in preparation to place a supply order. He scans the list of items that the system has flagged for reorder. On this list are items to be reordered from HUB as well as non-HUB items that the system also has been set up to track. One of the items on the list is the cut-off wheel that the team member just checked out; the removal of one wheel left the on-hand inventory below the minimum established for that item. The manager opts to check all the HUB items on the list and the order is placed. He will have to re-order the non-HUB items separately.
In the other storeroom, a manager prepares to put away a shipment of supplies just received from HUB. After verifying counts, she takes the scanner and scans the barcode on the bill of lading. The scanner screen displays every item on the bill of lading. She selects OK to receive in all the items into the system and returns the items to their bins. At any given time, any manager can pull up information about stock levels, usage patterns, and which user took out what. Regional managers have access to information from multiple sites. Items taken out can be flagged for use in a specific route and reports can be filtered to break out the data by user, route, or other criteria. When a transaction occurs that causes an error, there is a review process to correct it. For example, if the system incorrectly shows the inventory level of an item to be less than the amount being taken out, it will show up as an error. Videos of every transaction are accessible by finding the transaction on the report and clicking a link to access the files.
David Miller is the Waste Industry Manager for HUB Industrial Supply (Lake City, FL). He is a Certified Safety Professional and works with managers to effectively implement and manage PPE and MRO programs in the waste industry. He may be reached at [email protected] HUB Industrial Supply is an Applied MSSSM company.