This week we take a look at one of the first steps toward order accuracy in the warehouse; Properly receiving and stocking inventory. This is the sturdy foundation upon which we build the rest of our savings.
I would also like to thank our readers who took part in our survey and those who took the time to add additional comments.
Paul H-C
Introducing the New FoodConnex.com
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Sep 18th,
2007
Volume 3 Issue 130
Control Costs of Incorrectly Stocked Items
In order to deliver product correctly you must know how much of it you have, and where to find it.
- Incorrect stock counts can lead to promising a delivery to a customer when the items is not available. This causes embarrassment and increased shipping costs as you "rush" delivery. On the other end you might also pass up on a sale because your sales force thought an item was out of stock.
- Improperly stored items cause confusion with the pickers, resulting in slow pick times, and increasing the chance of a mis-picked item.
Both of these cost generating concerns are controllable through good inventory practices. We discussed Cycle Counting (one of the strongest methods for maintaining accurate stock numbers) in issue 46 and 47 so today we will be focusing on receiving and stocking methods.
| No matter what style of warehousing you use your inventory items always need to be put away correctly. Improperly shelved items increase pick times, and are responsible for as many as 25% of item mis-picks according to our survey. The four most commonly given causes for incorrectly stored items are:
The first concern can be addressed by increasing the amount of
training each employee receives, or by using a system that provides
them with the proper location automatically. Companies with a low
number of items and long term warehouse employees can normally do
without this type of system, but many distributors find that frequent
warehouse staff turnover makes a receiving or The second concern, unclear labeling of shelves, racks and pallets requires some ongoing attention. Marks can quickly become illegible in a busy warehouse environment. Make sure you re-paint or re-apply labels before they become unreadable. If you look up from a print-out and can not immediately identify your location label in the warehouse you can bet your stockers and pickers are having the same problem. The product labeling concern frequently occurs with import products which may be primarily labeled in a different language. Take a moment to review your warehouse by walking down the aisles, if several of your items have hard to read labels, or very similar looking labels you might consider adding your own identifiers. One associate of mine has taken to printing the item ID number, stocking location and description on florescent stickers and applying them to the items as they arrive. That same number is on the pick tickets and stock tickets eliminating the "language barriers". Easy to read labels help identify the items and reduce the skill set needed for both stockers and pickers. The fourth most common concern is overflow stock. The rack, shelf, or slot is full so the stocker puts it in the next one over causing confusion, miscounts, and sometimes "losing" the product. Be sure to clearly communicate to your warehouse staff your overstock policy. For warehouses that do not use multiple slots per item a general overflow stock area for seasonal or special order items is often ideal. Unexpected overflow should also be brought to your purchaser’s attention as it may signal an incorrect stock count. By focusing on these four concerns you can significantly increase
the accuracy of your inventory count and stock locations. To monitor
these improvements you will want to utilize the cycle
count methods described in issues 46 and 47, this
will provide an accurate count and identify items that have been
put away incorrectly before they reach the customer.
Our thinking inside the box segment this week focuses us on the
costs involved in correcting stocking errors and the dramatic difference
in cost between an error caught by the customer, and one caught
in house. |
Thinking
inside the box: Costs of Correcting Incorrectly Stocked Items Our sample company: Each year up to 87 (25% of the total) of the errors are caused by Incorrectly Stocked Items. Let's look at the difference if these are caught by a customer, or corrected in-house. Error Caught by a Customer: Error Found by Cycle Count or prevented by
Stocker. Cost of Cycle Counting $6,525
Old Cost to correct This leaves us with savings of $4,000 annually to split between improving labeling, tickets, and profits. Savings Goal:
$26,000 ...and those savings are based on only 15 orders per day! |
| Feedback
From Food Folks |
As you can see even in our first step we have significantly impacted our accuracy and our savings. With a firm foundation in place we can move on to our second step. Next week we address the topic of taking the customer order accurately and confirming the order. | |
| As
mentioned in our article our interviews found that Food Distributors
attribute 25% of errors to stocking concerns. Despite this high
rate of blame less than 10% of respondents are actively working
on stocking accuracy. |
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