This chapter lists eight basic guidelines that should be followed for inventory control to work properly and provide good results.
1. Do not use DBA with an outside inventory
Do not attempt to use DBA with an outside inventory, such as a sales inventory. DBA is a closed loop inventory system where demand and supply details provide the feedback that drives MRP generation, job release, job priority, and shipment priority. Sales orders and sales inventory cannot be handled in an outside system because it severs the feedback information that underpins the closed loop system.
2. Do not avoid using locations
Do not avoid locations by using a single dummy location that has no meaning. Use multiple locations so that stock quantities are tracked against actual locations. Using multiple locations reduces errors, increases inventory accuracy, and saves time by facilitating job issuing, order picking, and stock counts.
3. Use cycle counting for bulk materials with variable usage
Many bulk raw materials such as plastics are difficult to track at job level and have usage quantities that vary from job to job. The only practical way to issue such materials to jobs is to accept the BOM usage quantity by default. A cycle counting schedule should be applied to such items so that periodic stock counts are made to adjust on hand quantities to reflect actual stock on hand.
4. Avoid mass physical inventories
Unless required for auditing or regulatory purposes, avoid conducting mass physical inventories where you freeze operations and count your entire inventory. Mass physical inventories are highly disruptive to operations and notoriously error-prone. Instead, implement a cycle counting program where you count selected items, item categories, or location groups on a periodic basis. Small cycle counts are relatively easy to conduct and can be performed with minimal disruption to ongoing operations.
5. Issue material to jobs in real time
In order to insure accurate on hand quantities, it is essential that material be issued to jobs in real time through the Work Center Schedule screen prior to starting associated job sequences. If any errors exist among BOM component specifications, they are likely to be detected at time of use and can be corrected to prevent future errors. The most common source of inventory errors is to wait until job finish to “backflush” material after the fact without any scrutiny of actual components and quantities used.
6. Detect and correct BOM errors immediately
Inaccurate BOM component specifications are a major source of inventory errors. Material gets issued by memory instead of from a pick list or dispatch list and then is pre-filled in the Job Issues screen without scrutiny, in which case errors go undetected. Instead, issue material from a pick list or dispatch list so that errors are detected when the issued material does not conform to what is needed on the shop floor. When BOM specification errors are detected out in the shop, see that the BOM gets corrected immediately so that errors do not get perpetuated in future jobs.
7. Correct on hand discrepancies immediately when discovered
Whenever a discrepancy is discovered where the physical stock quantity within a given location differs from the on hand value, see that the on hand quantity gets corrected immediately with a stock adjustment so that the discrepancy does not adversely affect future processes.
8. Never use stock adjustments to bypass standard processes
Stock adjustments should never be used to bypass a standard process such as PO receipts, job receipts, job issues, or order picking. Each standard process has its own unique posting and updating in conformance with the overall process workflow. Bypassing a standard process with stock adjustments severs the process workflow and causes numerous costing, accounting, and job updating problems.
