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key to accurate inventoryA recent article in APICS Magazine (Jul/Aug 2014) reminds us that it is generally accepted that inventory records should be at least 95-98% accurate “in order to enable successful ERP planning and provide good customer service.”

The APICS body of knowledge emphasizes that cycle counting is the key to accurate inventory.  “By counting items regularly and using the cycle count process to identify and correct the sources of errors, companies can quickly raise accuracy levels beyond 90 percent and maintain a continuous improvement posture that maintains a high level of performance,” according to Dave Turbide, CPIM, a consultant and APICS instructor.

But as Turbide points out, just as important as cycle counting is the follow-through necessary to identify and correct the source of errors.  Only then can improvement be attained; cycle counting alone is not quite enough.

While correcting an inaccurate balance may treat the symptom, it ignores the disease, Turbide notes.  You need to figure out how to prevent the errors in the first place – and that requires identifying and remedying the source of those errors.

What’s the secret?  No secret at all actually… The only way to achieve and maintain a high level of inventory accuracy is through a solid and reliable transaction reporting process.  We didn’t say it would be fun or glamorous – but it is necessary.

Transactions, as Turbide points out, are created by people or machines – machines being the more reliable.  Thus, any transaction that can be automated should be.  The hierarchy of transaction accuracy looks about like this:

  • Direct connected sensors, like PLCs for recording inventory movement and usage; after that come computer-validated entries, like…
  • RFID – radio frequency identifications – though signal interference and bad scans can affect results
  • Bar codes – similar issues to RFID, but computers and a good WMS system can help validate scans
  • Validated manual entries – systems usually can validate at least some of the data entered by humans
  • Manual entry – the least accurate.  Systems often cannot validate unexpected transactions like adjustments, certain scrap or unplanned issues.

In the end, cycle counting helps – a lot.  But it’s not enough to achieve the premium (95%+) levels of accuracy required to maintain strong controls and customer service.  To achieve these goals, companies need to make the best use of automation, ERP and error correction.

 

dms_keeping_WPIn this final post (derived in part from a white paper from Dynamic Manufacturing Solutions that can be found here), we’ll provide a few key takeaways when considering barcode data collection in your own firm, and take a quick look at payback.

Common points to look for payback when implementing barcode technology include:

  • Shipping & receiving
  • Time entry
  • Part or Item picking
  • Inventory counting
  • Invoicing
  • Production labor input tracking

Each company needs to look at the high cost of inaccurate data, and consider which areas are most ripe for improvement through process automation.  Look for where data entry is required, determine the significance of that function, and then look for how automation will improve the accuracy or speed of that process.

What is the cost of the solution?  Many out-of-the-box solutions to enable data collection are relatively inexpensive.  Sometimes, as our example showed in our prior post, the entire system cost can be recouped in a single annual inventory replacement.  Generally, you’ll find modest investment and rapid payback.

When evaluating payback, look at the obvious tradeoffs: system implementation costs versus the positive benefits of such things as:

  • Reduced picking errors
  • Reduced inventory levels
  • Reduced carrying costs
  • Reduced data entry errors
  • Reduced inventory counts/expense
  • Reduced shipping errors (when you ship the wrong item and fail to ship the right one!)
  • Improved on-time delivery
  • Reduced out-of-stock situations

… and the list goes on.

Given the benefits, most data collection systems can have a payback horizon as little as 6 months to a year.  That doesn’t even include the intangible benefits of improved goodwill, customer retention, employee satisfaction and brand image.

In short, most firms that employ barcode technology intelligently – with a good plan and some forethought – find it both a short-term and a long-term money maker.  Start with a conversation and some guidance from your technology or ERP provider.  If they’ve done this for awhile, they will have no problem taking it from there.

 

dms_keeping_WPIn this series of posts we’ve been illuminating some key points of interest for companies interested in improving their business with technologies like barcode and RFID for data collection and inventory tracking purposes.  Our inspiration comes from a white paper from our friends at Dynamic Manufacturing Solutions (DMS), a provider of add-on products for Microsoft Dynamics NAV software users.  That white paper can be found here in its entirety.

Our 4th of 5 posts today covers an example of benefits derived from these technologies in inventory management, as described by DMS at one of its client firms.

This was a company with thousands of items (SKUs) and which conducted annual inventory counts manually.  As you can imagine, inventory counts were a major event at this firm, as DMS points out.  To avoid business disruption, counts usually occurred over a weekend, for which employees were paid overtime.  Prep work began ten days before the actual counts, including the entire prior weekend.  After the counts, it took four staff five days to reconcile all the numbers.

When the company decided to employ a 2-D barcode-based system for product and inventory bins and to utilize handheld readers to receive inventory, put away items and pick product for shipments, improvements rapidly followed.  They were able to carry out small, more frequent, easier counts.  They reduced the number of inventory adjustments required.  Faster cycle counts improved accuracy, which in turn improved order fill rates.  Customer satisfaction rose with improved quoting of delivery dates.  Counting only the reduction in inventory labor, the firm reported that the entire barcode system paid for itself after the very first annual count.

Our own deployment of these types of inventory and WMS automation solutions bears out similar success stories over the years.

Besides improving virtually all facets of a company’s inventory concerns, barcode technology has also been found useful in data collection during production (counters that tally production, or count lengths of material used during extrusion processes).  They’ve also been used to track the labor component in product assembly, and can be integrated with timekeeping systems for payroll purposes as well as improved job cost tracking – ultimately yielding more accurate actual time tracking that in turns leads to better future job quoting.

The results are almost always improved productivity, the result of using fewer people (or less time) to accomplish more production, more accurately, or to reduce the overhead costs of some previously manual, often inaccurate tracking chore.  Not to mention, reduced rework, improved accuracy, better quoting and improved on time delivery.  The end result when properly implemented is almost always twofold: improved customer satisfaction coupled with lowered costs.

And finally… the time to recapture barcode inventory investments represents one of the fastest recapture rates in all of automation today.  We’ll take a quick look at that in our next and final post on the data collection/barcoding topic.  Stay tuned…

 

dms_keeping_WPIn our prior post we looked at the basics of RFID as a possible tool in data (or inventory) management as applies to a shop floor environment.  Given the pros and cons of RFID (the cons mostly falling into the cost category), let’s turn our attention to barcoding technology next.

Again, we’re borrowing from our friends at DMS whose white paper on the subject is found here.

In terms of cost (as in low), complexity (as in simple) and universal acceptance (in manufacturing, it really is everywhere)… you can’t beat barcode technology.  More varieties (2-D, 3-D) are becoming available, and they’ve long been available in a number of different (usually industry-driven) “symbologies.”  Increasingly too, more and more data can be packed onto a barcode label.

In addition, most ERP systems have at least some form or rudimentary barcode capability or recognition built in, or at least, easily integrated.  As well, there are many available hardware and software options, thus keeping costs manageable.  This extends to handhelds as well which, while not “cheap” are certainly cost effective, and pack a lot of technology into a small and efficient footprint.

Barcodes can come in the form of labels, stamps, tags, Teflon-coated (dirt-resistant), large format (for higher shelves, say) and small format (in-line scanning), polyester tags, high-temperature resistant tags, and more.  Newer technologies involving data matrix layouts permit more data to be stored in the tag than ever before.

So… when it comes down it, which do you choose, RFID or barcode?

A number of studies have been conducted on the topic, and one out of the Univ. of Western England concluded “… while RFID can deliver improved operational performance over traditional barcode systems, it is found to be less reliable in implementation.”  Studies have found that while processing times with RFID can be quicker, they were less consistent, and that RFID produced higher error rates.  And given RFID’s higher costs and technology requirements, barcode still appears to be, as the DMS white paper describes it, “the most practical and accessible way to automate warehouse and industrial processes.”

While both technologies have seen gains since the study, barcode remains the “ubiquitous international standard for product tracking.”

As DMS notes, regardless of what technology you choose, the benefits can be very significant in key areas like:

  • Rejection and rework
  • Processing times
  • Entry errors
  • Manufacturing costs
  • Sales per employee

In our next post, we’ll take a look at the benefits of using barcode in inventory management.

Finally, we’ll conclude in our final post in this 5-part series with some thoughts on practical matters like where to barcode, and expected payback periods.  Stay tuned…

 

dms_keeping_WPWe’re picking up from our intro, last post, to talk today about data collection systems…  Our post is based on some sound points made by our friends at DMS in a white paper found here.

Even companies with electronic data management systems still record a lot of physical transactions on paper.  Sometimes it’s almost unavoidable.  Handwritten receipts… parts issued to jobs… shop floor travelers… vouchers… shipping documents, etc.  Eventually, most of these need to be translated into the firm’s electronic realm.   Too often, however, the document is lost, or delayed when found, or improperly recorded (typos, number errors, etc.).

There is a cascading effect to this.  When a picker pulls something from inventory improperly or without recording it, the system’s inventory levels will show more stock than is physically there.  Even once the problem is recognized, it typically involves pulling someone away from their regular job and correcting the mistake.  Productivity is reduced if this happens often, with a corresponding effect on margins.  And if the problem is not recognized, the results can be worse: unfulfilled production or customer promises, bad delivery quotes, expedited shipments, and so on.

It’s been said that a 10% degradation in on-time delivery results in a 1% market share loss.

The point is: recording transactions on paper is a highly volatile and potentially destructive practice.  In most cases we find the effects are actually far worse – once they’re actually measured – than clients ever know.  In other words, the damage is even worse than you probably expected.

Here’s where our friends at DMS make a key point, and where the introduction of data collection (barcode and RFID technologies) begins to come into play.  First, break your processes down to the simplest, most common sense components.  “Applying lean principles to a paper system ensures that, prior to implementing an electronic solution, your processes are completely streamlined.”   Capture your data at the point of physical transaction.  It’s the first step to reducing delays and lost information.  After that, it’s time to look into automating the collection process.

Two key technologies exist in the shop floor data management arena: RFID and Barcode.  We’ll take a brief look at RFID first.

RFID (Radio Frequency Identification) technology uses small “tags” that contain unique information that describe whatever it is they may be attached to.  They share this information wirelessly (most typically have tiny antennae build into them) with computers, networks and databases.  Multiple RFID tags can be read simultaneously, for fast operation.  A tag could identify a single item, or if applied to a pallet can identify the entire contents of that pallet, or skid, or even a full truckload.

RFID works especially well in high-value, as well as high-volume environments.  It’s great when real-time visibility is crucial.  However, RFID tags are still relatively expensive for tracking inventory.  They generate a lot of data, which can sometimes cause confusion when trying to obtain succinct information.   We’ll continue next post with a comparison to barcode and what makes sense where.  Stay tuned…

 

 

dms_keeping_WP

Today we start a five-part post on data collection and barcode, for those interested in the basic What, Why and How of data collection.

Our friends at Dynamic Manufacturing Solutions (DMS) in Canada, (a provider of add-on products for Microsoft Dynamics NAV ERP systems with whom our firm partners) recently created an informative white paper that nicely highlights some of the opportunities and advantages inherent in the application of “mobile technologies” including barcoding and RFID.  We thought we’d reprise a few highlights for our readers in our next series of posts.

Their white paper, entitled “Keeping the Physical World and Virtual World in Sync: Improving Efficiency with Barcode Technology“ can be downloaded here, by the way.

The whole topic of “data management” has become crucial to business today.  In the manufacturing and distribution environments, data that is well managed can become a key competitive advantage.  Properly implemented, shop floor data collection systems can dramatically improve order accuracy and inventory visibility while reducing shipping and billing errors.  In the long run, companies that make mistakes lose market share, plain and simple.  Automated data collection systems remove this obstacle, when properly implemented.

Our own experience implementing these systems over the past decade or more reinforces this point.  On the other hand, poor data management can result in a host of bad results.  DMS points out a few:

  • Inventory Overstock
  • Expedited Purchases (rushed, last-minute order fulfillment usually in a panic)
  • Lower Than Expected Margins or Lost Receivables
  • Decreased Shop Productivity
  • Increased Office Overhead
  • Poor Customer Service

Shop floor data collection solves these problems with typically rapid ROI and cost recapture.  Today’s systems are relatively inexpensive, very cost effective, and have short payback periods.

But we always caution our clients up front: Can you define exactly WHAT you want from barcode?  Can you define WHERE it will be applied?  Where will it make your operation more efficient?  It becomes critical to implement the system that, as DMS puts it “accurately reflects your business processes to ensure you receive the most from your productivity investment.”

We’ll get into the Hows and Whats starting with our next post.  Stay tuned…

 

trends picIn recent articles on topics including the Internet of Things and Big Data, we’ve talked about technology’s increasing impact in business, particularly in manufacturing.  A recent blog post by Brian Oulton, an Industrial Director of Marketing at Belden, Inc. a century old producer of industrial products that include networking, IT and connectivity under a variety of brand names, discusses 4 of the biggest trends, and what to do about them.

Oulton’s “big trends” encompass topics we parsed before, but his ‘What To Do About Them’ comments are worth passing along.  In his view, the four big trends that manufacturers need to be aware of are: Internet of Things (IoT), Big Data, Cloud Computing and Industry 4.0.

As would befit a supplier of industrial networks, Oulton’s first recommended step is to make sure your own network is up to snuff, or as he puts it: “make sure your network is well-designed and that it lets you scale-up dramatically, easily and reliably.”  Of course.

But it’s his ‘brainstorming’ that’s worth giving a listen.  For example, on the subject of “Big Data”: You may already be collecting lots of data, but struggling to understand it, thus making it hard to act upon.  If you had it at your fingertips, what would you do with it?  Suggests Oulton:

“Could it be used to provide super customized products for customers, based on market trends and sales / demand data? Or, what if you could share trend and other data in real-time, directly with customers, have them decide what they want made, then make it and delivery it really fast?

What if algorithms could be applied to big data that would allow you to smooth out production? What benefits would that give you?

Big data can be used to accelerate business by quickly matching production with demand. What do you dream about being able to do in this area?”

On today’s so-called Internet of Things (interconnectivity across machines, sensors and appliances):

“This is about having information from disparate sources, some of which are in the factory and some of which are outside of it, available at your fingertips.

For example, let’s say you have trouble with a machine. Imagine that you could troubleshoot the problem using data not just from sensors, actuators, PLCs, etc. but also from drawings, videos and help text. Now add in information from patches and updates from the Internet, plus voice and video connections with the machine building company and other remote resources.

Now what other problems could be solved faster by being able to bring together a wide variety of information quickly?”

As to cloud computing and storage, Oulton suggests:

“With information available anywhere anytime, what advantages can you gain from that? Does it enable closer collaboration between different facilities? Can it connect you closer to your customers?”

Give Mr. Oulton credit for framing the questions companies today could be asking themselves – once they have the underlying infrastructure to warrant asking them.  In doing so, he’s framing the questions that are really at the heart of the future of manufacturing.

Read his full post here for further information.

 

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