The overall goal of inventory management is to have the right part at the right time at the right cost. But what are the individual steps that get you there? Setting up tracking is just like setting up any other process. You need to look at your situation, look at your options, and then choose the ones that work best for you.
Even though everyone's situation is a bit different, there are some general steps everyone can take to ensure they're moving in the right direction. And at each step, having the right inventory management software saves you time, money, and frustration.
Step 1: Do a physical inventory count
Before you know what to do with what you have, you need to know what you actually have. And remember, you can't really trust your existing records. If you could trust them, it would mean you already had a great system in place. But you know you don't, so you're going to need to physically count your existing inventory. It might not sound like fun, but the good news is that the information you collect is going to help you with the other steps.
In the bad old days, physical counts would start with handing out clips boards and hoping everyone managed to write everything in the right columns. Inventory Management software (and the inventory module built into a good CMMS) makes the process a lot more reliable. Imagine you're carrying spare fan belts at two locations in your multi-facility organization. Some are at Plant A, some at Plant B. With a paper-based count, you'll need someone to notice you've got the same parts in two places and add their numbers up.
But with modern cloud-based software solutions, all the information you collect is stored in the same database, seamlessly updated in real-time. Your counts are accurate, even with inventory spread across facilities.
Step 1.5: Get more than just the count
While you're counting, make sure to get as much information about your inventory as you can. Numbers and amounts are just the beginning. Where it's possible and appropriate, try to gather things like serial and lot numbers, country of origin, supplier, and cost. Down the road, this information can be invaluable. For example, knowing the supplier makes reordering a lot easier. And knowing the lot number can mean avoiding a lot of grief. Once two items from the same lot fail a lot sooner than they should have, it's easy to track down the remaining ones you need to return to the supplier for a refund or replacements. Another example: keeping tabs on the cost of an item lets you know when it's time to negotiate a bulk buy or switch suppliers completely.
Here, again, inventory management software is going to make your life a lot easier. The software is designed to make adding and then finding data a breeze. Instead of going through piles of paper, everything you need is only ever a mouse click away.
Step 2: Prioritize your inventory
There's more than one way to do this, and all of them are a good idea. One of the classic methods is A, B, and C. Another involves looking at criticality. The first allows you to set levels of control, how tightly you guard and how closely you track the inventory. The second can help you set min and max levels.
A, B, and C
Basically, you divide your inventory into three groups and then establish different levels of control for each one. Inventory in A takes up the smallest portion of your overall inventory, but it's also the most expensive and critical to your success. You'll set up tight controls and collect and track as many data points about that inventory as possible. Inventory in C is basically the opposite. It's the largest portion, but also likely the least expensive and valuable. The items and materials in B are everything that falls in between A and C. The reason B exists at all as a category is to prevent things from A or C sliding in and out of the categories as prices and situations fluctuate.
What would this look like in real life? For example, you're running a fulfillment center, which means you have a lot of conveyor belts. The motors that run them are in category A because you have relatively few of them, they're expensive, and they're important. You'll have tight controls over them, including keeping them under lock and key and having a formal, restricted process for purchasing and taking delivery. Over in category C, there's disposable earplugs. They come in boxes of 200 pairs, and you only ever track boxes, which means your count is off at any given time by between zero and 199 pairs. Category B might have some of the smaller replacement belts.
There's a whole art and science to determining criticality, but we can sum it up as the answer to this question: How bad is bad? If an asset fails, how bad it is going to be for the organization. And remember, there are both different degrees and types of bad. A failure might cost you a little bit or a lot of money. That's a difference of degree. But instead of money, a failure might lead to a safety hazard. Between money and safety, That's a difference of type. So, for each asset, you determine the criticality. Then you look at the parts and materials you need to keep your critical assets up and running. When setting min and max levels, make sure to give yourself enough of a safety buffer.
Criticality isn't the only way to set min and max levels, of course. With a good CMMS system, you can use historical work order's associated parts and materials to look at usage over time. If you know you use a part once a week and the lead time is five weeks, you'll need to keep about five or six in inventory.
Step 3 Decide on roles, who can do what
Once you have an accurate count and a good idea of what and when to order moving forward, you're going to want to protect your hard work. You need to set up processes for who can place orders and who can accept deliveries. Although it's possible to let all your technicians order parts and materials as they need them, it's likely a better idea to restrict ordering permissions. In fact, you can have the software do most of the work for you. By setting customizable min and max points, the software can send you an alert or place the order for you once you dip below a set point.
It's also important to set up specific processes for accepting deliveries. In the case of something like earplugs, it's likely best to just count the boxes and assume they have the right number of individual pairs. For something like an electric motor, you'd want to make sure it works before adding it to your inventory. You'll also need a system in place for accepting partial deliveries. You might have ordered 100 cogs, but because of logistical issues with the supplier, you're going to get 45 on Monday and the rest on Thursday. The good news is that good inventory tracking software, or the purchase order module in a CMMS software, will make tracking partial deliveries easy.
Ready to take control of your inventory? The first step should be finding the right software that's going to make all the other steps that much easier. If you haven't already, now's the time to start reaching out to providers. They'll be more than happy to talk with you about your goals and if and how they can help you reach them.
Explore further about Inventory Management Software's Features and Benefits, and supplement it with 5 Factors to Consider when Searching for Inventory Management Software for Your Business.