September 12, 2006
Let Workers Take Responsibility For Inventory…Part 1
Let me start out this Issue with a quote from Gain-sharing in the Warehouse: Power from the People, “The true challenge (of Gain-Sharing) is collecting and turning out data so that it is meaningful… Technology must tie this all together.” This statement could not be more true. The best incentive plan in the world is useless without a way to track employees’ production. In this issue, we are going to set up a live gain-sharing situation using a food oriented software program. Then next week we are going to talk about how it can be utilized to truly understand how much an incentive plan can really save you. Let us now start our gain-sharing example.
Let us say that you are a small to medium sized food distributor that does about 100 orders per day. Right now you do not have any sort of food specific system implemented to help track your operations and everything seems fine because although you are losing money on some transactions in the end you come out making money. One day you receive an angry phone call from a customer that is irritated on the constant incompletion of his orders. After some research into the problem you find that your warehouse employees have no motivation to work more efficiently and are not taking responsibility for incomplete orders. This lack of motivation is also causing your warehouse workers to become lazy when reporting inventory, so you never know if an item is really there or not. From these observations you decide to look into creating a Gain-Sharing incentive plan. In Issues 76, we explain how to start an incentive plan from scratch and Issue 77 we explain the specific incentive plan of Gain-Sharing. If you look back to issue Issues 76, you will see that first step in creating an incentive plan is to find out how efficient your employees are currently working. Since you have never tracked your employees’ production you have no idea exactly how efficient they are working. Let’s look at an example of how one commercially available food software solution handles tracking inventory accuracy using a Physical Count Worksheet.
The basic idea of this report is that it shows you exactly how much product you should have in your inventory at that exact moment. What you do with the report after you see how much product should be there is that periodically you tell your employees to go out and physically count your inventory. The great thing abut this report is that you can print it out and have them write directly next to the product name. When you should count your inventory and which items you should count is completely up to you and your business. We have talk extensively about this in our issue about Cycle Counting Issue 47 and our issue on Turning Over Inventory in Issue 71. Now after you have received the actual amount of counted product in the warehouse and put them into your software you can create a Physical Count Variance Report that compares your computer number to your actual counted numbers.
This is a portion of an actual Variance report. As you can see it shows you how many the computer counted, how many were physically counted, and variance or difference between the two in Inventory cost $’s. Everything you needed to know about your inventory is right in front of you, even how much money you are losing. It looks like that on this particular count, that Tony did, you lost $4,876.20!! In next week’s issue, we are going to discuses how this information can be used in a gain-sharing situation and how by increasing your accuracy by less then 1 percent can save you over $900!!
Food Oriented Software Helps Track Inventory & Create Gain-Sharing Programs That Save You Money
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