Two of the initial questions we ask our clients are, “How accurate is your inventory?” and “How many inventory turns do you manage?”

We ask the question at various levels within the organization and often find that there really isn’t a consensus on these key metrics.  In order to drive improvement, we have to have a good measurement system. We start there.

We review your full SKU profile and identify about 25 SKUs that represent a cross-section based on their valuation and velocity. We work with your team to confirm a definition of accuracy which is SKU, Lot, Location, Quantity. We then initiate a daily cycle count of those 25 items. 

It does not make sense to pursue a random or extended cycle count program until we can demonstrate that we can keep a known sample group accurate.

Each day the cycle count team identifies the inaccuracies and then conducts a root cause analysis. We are looking for systemic process issues and systemic master data issues.  Typical root causes for inventory inaccuracy include – inventory systems that record transactions after the fact rather than directing activity with confirmation, SKU misidentification, incorrect formulas/backflush, expired product disposal procedures, and general lack of discipline. 

We focus on improving the processes, systems, data, and disciplines on a daily basis until we’ve reached a 100% accuracy level within the control group. With the processes under control, we expand to a formal cycle counting program and drive to full control of the SKU population.