inventory control a&a is tackling its last operations’ weakness !
TRANSCRIPT
Inventory control
A&A is tackling its last operations’ weakness !
Introduction – 1/2
This presentation explains why that after 14 years, A&A Computers is finally serious about improving its inventory control systems.
It explains the effects of a poorly managed inventory.
Introduction – 2/2
It mentions the desired outcome of the improvement activities.
It lists some of the methods used in the consultancy.
It outlines what the future tasks are:• To make sure that the inventory system
remains accurate and reliable.
• To make use of the accurate stock counts.
Historical overview – 1/4
Some companies are started with a huge loan or investment.
In their starting up period, a management team sets up all financial, sales, technical, marketing, and other systems.
Example: Hughes Motors in Usa River.
Historical overview – 2/4
A&A computers was set up by its owners, with a small starting capital.
In the first two years more money was injected, until A&A Computers finally could stand on its own legs.
From then on, profit was used to expand the company’s operations.
Historical overview – 3/4
Management capacity and systems grew slowly along with A&A Computers Ltd.
Examples of starting / improvement years:
Management system
Started inyear
Improved after years
Repair database 1 4, 11
Purchasing 6 In little steps
HRM & salary admin 1 9
Warranty (‘RMA’) 10 11
Accounts 1 13
Historical overview – 4/4
For over 5 years now, A&A Computers has tried to improve the stock recording, but its accuracy has remained poor.
To counter this, we have done monthly 100% stock taking. But, there have been insufficient explanations for stock differences, continuously.
The quality of A&A Computer’s inventory system has remained behind all the other systems that the company uses.
Effects of poor inventory control - 1/3
Through under-stocking we run out of items, so we loose selling opportunities.
Through over-stocking money is ‘locked up’, so that we are unable to order other, more essential stock.
Effects of poor inventory control - 2/3
The exact stock value is unknown, making our accounts inaccurate.
It is difficult to detect fraudulent transactions.
Effects of poor inventory control - 3/3
In the next few years, A&A Computers wants to open two more branches. We are not ready for new branches, because our stock system must be accurate and real-time updated.
Desired outcomes – 1/2
Less than 1% error when comparing stock counted and stock on record.
100 % explanation of any stock level differences. Note that this accuracy has already been reached in Moshi – so it is possible!
Desired outcomes - 2/2
Up-to-date and accurate stock levels in QuickBooks, and on our website, so that we can:
• Check availability while selling.
• Order more accurately.
• Keep optimum stock levels - at all branches.
Methods to improve inventory – 1/4
This year, a consultant has:
• Analyzed our stock system.
• Proposed improvements.
• Tested results.
• Followed-up on implementation of improved systems.
Methods to improve inventory – 2/4
Some of the challenges encountered:
• Several employees resisted change. They feel comfortable to continue using our old systems.
• Arusha stock is distributed over several locations: store, shop, display cabinet, showroom, workshop.
• In QuickBooks, stock is not properly recorded, and not in real-time.
Methods to improve inventory – 3/4
Some of the improvements proposed, and now used are:• The part request cards were replaced by Parts
Tracking books.
• Bar codes were attached to all parts. It was tested that with a scanner, quick and accurate stock taking can be done.
• By instructing sales staff, QuickBooks is gradually updated sooner after receiving or releasing parts.
Methods to improve inventory – 4/4
At this stage, test results are few:
• It will probably take several months to get stock reports accurate.
• Soon we can start sampling actual stock levels, and compare them automatically with recorded levels.
• After testing, more improvements to procedures may be suggested.
Future inventory tasks - 1/2
After all inventory control systems are in place, there is more to be done.
Future inventory tasks - 2/2
The consultant is to follow up that:• New procedures are understood
• New procedures are used as intended.
• New procedures are adhered to.
Once stock levels are accurate, we can use the sales/week value from the QuickBooks’ report “Stock details” to improve calculation of order quantities.
Conclusion – 1/2
A&A Computers must have a well-managed inventory system, so that:
• it can improve its operations
• It will be ready for expansion.
Conclusion – 2/2
Staff of A&A must understand the importance of improving inventory procedures, and be willing to put in the extra effort needed.
The end
September 2009Alex Righolt