Manufacturers work hard to meet customer delivery schedules with quality parts while reducing costs. Successful manufacturers do so with programs that reduce work-in-process inventories, shorten production times and minimize production costs.
Yet for many organizations, inefficient material handling and inventory control processes often impede the ability to meet these objectives.
Current Situation: The Legacy Approach
Legacy systems traditionally track the warehouse, location stored, part number and quantity in a single record, even when there are multiple quantities of one inventory requiring multiple, more accurate records. These systems don’t provide the right granularity or real-time visibility into inventory levels, location or volumes.
Whenever quantities of inventory are moved from one location to another within a warehouse, an operator must print out multiple labels and manually review part numbers, quantities and location before moving that inventory to another location on the warehouse floor. The operator must then manually key in the new locations of the inventory via scanner. Each of these steps introduces opportunities for errors.
Then a material handler transports inventory containers from one location to another, entering into a handheld barcode scanner the appropriate part numbers, quantity, and current location in the “to location” and “from location” fields. These steps introduce even more opportunities for errors.
Given the complexity of inventory movement within a manufacturing environment, it’s often difficult for material handlers to recall the accurate “from” and “to” location as they move containers in a justin-time production environment. This means potential errors if the wrong locations are input, or wasted time going back to get the right locations to enter.
Beyond burdens of manual recordkeeping, this legacy approach adversely impacts inventory balances.
As an example, if a forklift operator is moving 300 pieces of finished goods from a container which contains a total of 500 pieces from location A to location B, the legacy inventory system does not track that movement in real time. A query to review the inventory balance file will not be accurate, since the 300 pieces have not yet been tracked to their new location.
Using the same example, the 500 pieces of the item stored in location A which were picked as 300 pieces for a shipping order could mistakenly be issued by the handler as material from location B. The end result would be 500 pieces still showing in location A and -300 showing in location B, a negative balance in location B which impacts the accuracy of inventory levels and shipping.
The inventory control system reflects “negative inventory” because an incorrect location is used in a transaction or an incorrect quantity is transferred in a location transfer transaction.
In simpler terms, the inventory control system does not live in the physical reality of the material handling process, and does not accurately reflect the true reality of the production process.
Negative Impact on the Business
What’s the overall business impact on a manufacturer using this legacy approach?
When manual handling and recordkeeping drive inventory into a negative state, a manufacturer never has accurate visibility into the physical movement of inventory within the enterprise. Shipping and delivery are negatively impacted which compromises customer satisfaction.
Many companies are forced to assign staff members to spend hours or days each week tracking the source of the negative inventory balance in multiple locations, warehouses or manufacturing facilities. Once the team members find and flag errors, they must manually adjust inventory control records to reflect accurate inventory balances. This results in an inefficient use of time and resources.
The methods also impact those on the warehouse floor. A material handler’s main responsibility is to move goods from one location to another to optimize production and shipping. Manual recordkeeping slows the material handler’s job down. Plus, as with any manual process, the methods increase the likelihood of errors when tracking the “to” and “from” locations of inventory movement.
A Better Way: An Integrated Approach
Manufacturers looking to overcome these difficulties turn to integrated manufacturing solutions that reflect the physical reality of the material handling process.
These advanced systems identify in real time current inventory levels as impacted by inventory transactions.
Advanced MES and ERP systems offer the connectivity to automate processes, track material improvement and ultimately analyze the business for improvements and additional opportunities.
Connecting the Enterprise
Modern, smart MES and ERP systems are fully digital, offering connectivity from the shop floor to the top floor, from production to finance. This ensures that all data in the system and across the enterprise is linked and available to any user from anywhere. No more data silos, no more reconciling disconnected or disparate systems, and total accounting for and access to inventory information across the company.
Why does this matter? For many manufacturers, waste, scrap, inventory shortages or overages, and poor product quality cause both customer satisfaction issues and add immense cost to the business. But without real-time visibility to these issues throughout the enterprise, decision-makers don’t have the information they need to course-correct, or only do so after it’s too late. With a fully connected enterprise, managers throughout the enterprise have immediate access to inventory and production information, including alerts if something is off. This connectivity enables real-time inventory tracking (no more manual cycle counts!) and allows leaders to both keep tabs on whether the business is running to plan or to quickly understand issues and address them before unnecessary delays and unnecessary costs occur.
With digital connectivity comes the ability to automate processes, handoffs, and data sharing. Manufacturers agree that their environments are littered with paperbased processes, including inventory counting, often accompanied by manual data entry from either reading what’s on paper and typing that information somewhere else, and/or in creating that next paper document (paper traveler documents, for example). And quality measurements and guidelines are often measured or input manually, inviting errors that could have upstream inventory implications and downstream production ripple effects.
In a connected environment, all critical processes and handoffs – from the master production schedule to inventory movement to quality measurements – are automated. That means a digital handoff of the production plan to plant operations; that means digital, automated, instant communication of any new quality specifications to all relevant workstations, locations, and personnel (no more reams of binders!); that means digitally scanning inventory and work in process (WIP) product as it flows through production; that means measuring quality in line and digitally flagging issues if they arise, automatically halting production if needed and preventing inventory waste or scrap before it happens. These capabilities ensure seamless handoff processes and inventory alignment to production for better “just-in-time” capabilities and running as lean and mean as possible.
Tracking Inventory and Data
With connectivity and automation, manufacturers can easily track just about anything in their company, most notably inventory and material movement. Digital tracking (via serial numbers, or serialized inventory management) – particularly with WIP, supply chain, or inter-facility product being tracked and measured real-time – ensures accurate inventory levels and alignment throughout the enterprise across all locations, enabling greater cost control and eliminating wasted resource time manually counting or documenting inventory. Imagine eliminating those situations where you show negative inventory because someone mis-counted, didn’t update, or didn’t share some paper-based account of inventory until it was too late. Automated tracking gives you the control to eliminate these human errors.
Having digital tracking also makes audits – normally a time-consuming and nerve-wracking effort – much easier. As one Plex customer, Jeff Karan, IT Director of G&W Products stated, “Now we can sit in a room and pull up whatever auditors ask for within seconds. They’re blown away. They walk out of here, smiling and completely impressed with our ability.” Wouldn’t it be great if you had that level of tracking and traceability, with the control to pull up live data wherever and whenever you needed it?
Analysis for Continuous Improvement
With a smart, connected enterprise, automated processes and full tracking, manufacturers have the power to analyze the business, either for real-time status or for continuous improvement – or both. Using real-time reporting and analytics, anyone in the company can view reports and trends, enabling people to make the adjustments needed for greater efficiency. Inventory accounting, usage, and disposition, for example, can be modeled to determine optimization levels and how to adjust to meet customer demand and delivery. Anyone would want this capability, and you will too.
These four capabilities - connecting, automating, tracking and analyzing - enable a stronger and more capable manufacturing environment.
Inventory Accuracy in Action
Automotive supplier Newman Technology, based in Mansfield, Ohio, serves as a best-practice case study after putting smart, automated inventory control methods into action.
The company manufactures parts for automobiles, motorcycles and all-terrain vehicles (ATVs). The supplier’s primary products include exhaust parts, door molding and door sash components.
Newman’s 700 employees build hundreds of thousands of components each day in four facilities. The company receives 1,500 containers of parts a day from many suppliers.
After production and assembly, Newman Technology ships out 5,000 containers of components to 15 customer locations around the world.
For years, Newman Technology employees relied on manual recordkeeping to move inventory through the operation.
Material handlers manually keyed in data when moving inventory from one location to another. This was especially cumbersome given the company produces parts out of four buildings with multiple production line areas.
The company dedicated three full-time staff members to track down negative inventory balances resulting from the manual, inaccurate inventory control process.
Each day, staff printed out a negative inventory report, traveled around the shop floor, finding the locations of inaccurate, negative balance files, and manually counted and reconciled the inventory records to reflect the current location.
On top of this daily process, the company conducted bi-annual physical inventories to accurately gauge the physical location of inventories.
To overcome these limitations, Newman turned to Revolution Group, a manufacturing consultancy based in Columbus, Ohio. Revolution Group recommended Plex to connect and manage the entire manufacturing process, from materials’ orders to final product distribution.
Since implementing Plex, the system’s serialized inventory features automatically track the location of inventory in each of the four facilities and 220 work centers, giving a real-time snapshot of the current location of more than 330,000 components received daily, and 100,000 parts shipped out daily.
Explains Pat Welsh, Senior Consultant with Revolution Group, “It’s been a dramatic improvement for Newman Technology. Now, material handling operators have instant access to real-time inventory location data directly from handheld devices. Workers easily pull up the location of inventory on the shop floor. They can see via the serialized tracking exactly where all inventory is located.”
The new methods improve material handling and accuracy. Most significantly, there are no more negative balances on the records.
Notes Mark Williams, Senior Staff Engineer at Newman Technology, “With a real-time, serialized inventory process, up-to-the-minute inventory location data shows up in our records with just one scan. This represents a huge efficiency. We know where inventory is located throughout our multiple facilities, and no longer worry about conducting physical inventories or complicated work-arounds to track down negative balances.”
Newman Technology achieved 99 percent accuracy of inventory, and reduced inventory on-hand cost by 50 percent.
Concludes Williams, “By far the biggest business impact is having about 50 percent less inventory sitting on our warehouse floors. Before we used the serialized inventory tracking, we were forced to carry nearly double the inventory. Now as we move toward a “just-in-time” delivery strategy, we reduce on-hand inventory that does not tie up so much cash – a huge business benefit to our company.”