A physical inventory…
Every logistician’s
nightmare.
In
our own warehouse operations, we classify physical inventory by two criteria.
With respect to the volume of counting, man-hours required and
inconvenience for business, we identify three types of physical inventory:
complete. It
requires a total warehouse shutdown
selective – ranging from one product to a whole section.
Operations only with this subset of goods are stopped.
flexible (an Ultimate term) – it’s a
physical count done ‘on the fly’ when we discover mixed up goods. If a warehouse is set up
correctly and is technologically advanced, the process takes only a few seconds and has no
effect whatsoever on business operations.
With respect to timing, physical inventory is divided into:
- planned – done according to a schedule (daily, weekly…)
- emergency
Thus, there may be an annual complete count, an emergency selective count, an emergency total count, etc.
A sine qua non for a minimal acceptable validity of results is a double check. That’s when stock is counted by two people completely independently of each other.
This is what a physical inventory at a traditional company’s warehouse looks like:
Stock quantities are printed out from warehouse software and given
out to inventory custodians. They check real stock quantities against the ones on paper, fill in the
‘actual quantity’ column, and return the papers to their supervisors.
The supervisors re-check
items that have large deviations. Confirmed errors are corrected according to real numbers by
entering goods receipt / issue documents with a ‘physical count’ note into the system.
No brainer, the process is slow.
E.g., in Ulmart, the complete annual inventory count at their
Moscow region warehouse hub (> 20,000 sq. m., ≈100,000 SKUs, ≈1 mln units of storage) took 48
hours and efforts of all shifts – and that was only the counting proper.
While this was going on,
the warehouse, of course, could not be operational, so the annual inventory counting procedure could
only be done during the long New Year holidays.
Despite these monumental efforts, however,
results of the count didn’t inspire full confidence: often, warehouse personnel were confused as to
what they had counted and what they hadn’t.
Lots of errors were made transferring data into the
system from paper: this manual data input alone required up to three working days (after the 48 hours for the physical count), while the warehouse was in operation
again, generating new errors over the same stock.
In view of these external restrictions, the
process was always going on under harsh time deficit. So it’s only natural, that speed was a
priority over quality.
Sounds familiar?
That is how we have fixed it.
First, we introduced a consolidated physical inventory document into the Ultimate e-Trade. It contained data from the three counts (two consecutive and one test count), as well as a general control and management panel.
Second, counting with eyes, hands and paper was discontinued in favor of semi-automatic counting using barcodes with Ultimate WMS portable data terminals.
This is how the process looks like now: a warehouse employee picks
everything he sees as he’s walking by.
It’s that simple.
After all products within the area of responsibility have been picked, a warehouse employee runs the ‘Complete count’ command on his PDA.
If that was the first count, then the e-Trade waits for the second
one.
If that was the second count, then the system generates the task for a test count of items
where there were any issues, which can be done manually.
Authorized personnel may observe the counting process, intermediate results and forecast of its completion online through the main form.
After all counts have been completed, the
Grand Inquisitor
person in charge of the physical inventory (in Ulmart – the head of the warehouse section, in
smaller companies – the head of the warehouse or the business owner) presses the Big Red Button, and
Ultimate automatically generates receipt /issue documents.
All it takes is about a minute –
instead of three working days in the previous case.
While elaborating implementation of the scheme, we took into account legal requirements for physical inventory count documents, as well as methodology standards for such inventory counts (collecting signatures of authorized personnel, appearance of printed forms, etc.).
The slides: physical inventory as seen by a warehouse employee (screenshots from his PDA):
The results.
For the first time, a complete physical inventory new-style was
held in January 2014.
The whole process took 24 hours. With the double (and where needed, an
additional test) count and finalization of results.
With valid results, guaranteed by the
process.
Done across all warehouses in a centralized and simultaneous way, though Ulmart has
several warehouse hubs with the abovementioned parameters.
And dozens of smaller warehouses.
Now, a flexible inventory (in case something’s missing).
Today
there is no need running and jumping, signaling with their voice pitch and height of jumps how awful
the problem is.
The person who failed to find a product, simply presses the ‘I can’t find it’
button on his PDA. The supervisor in charge gets an alarm in his interface and confirms the task for
counting this item pressing the button. During the process, Ultimate takes into account products
that haven’t been shipped off and are located in batched orders, at pickup points, or in transit
within the warehouse.
So, whether we are alone in the Universe or not remains a big
scientific question.
However, the logistic science fiction becomes reality right in front of our
eyes!
The iron stallion takes over the peasant’s horse.