By:  Chuck Theisen

Little “mrp”, MRP II (e.g. Big “MRP”), ERP, Supply Chain Management, as well as associated approaches such as JIT, TOC, Lean Manufacturing, and others all, in one way or another, address the common operations issue of efficiently managing materials. Management of inventory has been, and continues to be, a major business driver in implementing integrated business systems such as ERP and Supply Chain Management.

How do we better manage our inventories?  The basic tenet in improving inventory management processes, and therefore directly impacting materials decisions, is increased visibility of our inventory position.  Increased visibility of our inventory position is driven by timeliness and accuracy in all inventory transactions.  Lack of timeliness in inventory transactions is typically a reflection of “lag” time in those transactions.  Lag time is defined as the elapsed time between the physical activity (e.g. move, consumption, etc.) of the inventory and when the business system transaction reflecting that activity updates the database.    Lack of accuracy is usually a result of missing inventory information (e.g. item numbers, unit of measure, lot numbers, location ID’s etc.), lack of training for personnel, or personnel misunderstanding of management’s priority for accuracy in the transaction process. 

Lag time issues can be addressed by streamlining the transaction process, using tools such as bar code, RFID, or similar systems, and ensuring the transaction is processed at the point of the physical activity.  Accuracy issues can be addressed by proper training, and ensuring all required information and tools are available and accessible to the people doing the transaction. 

Remember, ultimately we must have accuracy at whatever level of granularity applies to my environment (e.g. item, lot, warehouse, location).  Any misrepresented granular count record can directly affect planning and consequently effect purchasing and manufacturing. This can cause us to have too much of some items and not enough of the needed items.  Also material management costs will be higher, based upon the need for extra counts, inventory moves and handling, etc.  To minimize these costs, and improve customer service, the organization needs accurate, timely inventory information.