Inventory control

A&A is tackling its last operations’ weakness !

Introduction – 1/2

This presentation explains why that after 14 years, A&A Computers is finally serious about improving its inventory control systems.

It explains the effects of a poorly managed inventory.

Introduction – 2/2

It mentions the desired outcome of the improvement activities.

It lists some of the methods used in the consultancy.

It outlines what the future tasks are:• To make sure that the inventory system

remains accurate and reliable.

• To make use of the accurate stock counts.

Historical overview – 1/4

Some companies are started with a huge loan or investment.

In their starting up period, a management team sets up all financial, sales, technical, marketing, and other systems.

Example: Hughes Motors in Usa River.

Historical overview – 2/4

A&A computers was set up by its owners, with a small starting capital.

In the first two years more money was injected, until A&A Computers finally could stand on its own legs.

From then on, profit was used to expand the company’s operations.

Historical overview – 3/4

Management capacity and systems grew slowly along with A&A Computers Ltd.

Examples of starting / improvement years:

Management system

Started inyear

Improved after years

Repair database 1 4, 11

Purchasing 6 In little steps

HRM & salary admin 1 9

Warranty (‘RMA’) 10 11

Accounts 1 13

Historical overview – 4/4

For over 5 years now, A&A Computers has tried to improve the stock recording, but its accuracy has remained poor.

To counter this, we have done monthly 100% stock taking. But, there have been insufficient explanations for stock differences, continuously.

The quality of A&A Computer’s inventory system has remained behind all the other systems that the company uses.

Effects of poor inventory control - 1/3

Through under-stocking we run out of items, so we loose selling opportunities.

Through over-stocking money is ‘locked up’, so that we are unable to order other, more essential stock.

Effects of poor inventory control - 2/3

The exact stock value is unknown, making our accounts inaccurate.

It is difficult to detect fraudulent transactions.

Effects of poor inventory control - 3/3

In the next few years, A&A Computers wants to open two more branches. We are not ready for new branches, because our stock system must be accurate and real-time updated.

Desired outcomes – 1/2

Less than 1% error when comparing stock counted and stock on record.

100 % explanation of any stock level differences. Note that this accuracy has already been reached in Moshi – so it is possible!

Desired outcomes - 2/2

Up-to-date and accurate stock levels in QuickBooks, and on our website, so that we can:

• Check availability while selling.

• Order more accurately.

• Keep optimum stock levels - at all branches.

Methods to improve inventory – 1/4

This year, a consultant has:

• Analyzed our stock system.

• Proposed improvements.

• Tested results.

• Followed-up on implementation of improved systems.

Methods to improve inventory – 2/4

Some of the challenges encountered:

• Several employees resisted change. They feel comfortable to continue using our old systems.

• Arusha stock is distributed over several locations: store, shop, display cabinet, showroom, workshop.

• In QuickBooks, stock is not properly recorded, and not in real-time.

Methods to improve inventory – 3/4

Some of the improvements proposed, and now used are:• The part request cards were replaced by Parts

Tracking books.

• Bar codes were attached to all parts. It was tested that with a scanner, quick and accurate stock taking can be done.

• By instructing sales staff, QuickBooks is gradually updated sooner after receiving or releasing parts.

Methods to improve inventory – 4/4

At this stage, test results are few:

• It will probably take several months to get stock reports accurate.

• Soon we can start sampling actual stock levels, and compare them automatically with recorded levels.

• After testing, more improvements to procedures may be suggested.

Future inventory tasks - 1/2

After all inventory control systems are in place, there is more to be done.

Future inventory tasks - 2/2

The consultant is to follow up that:• New procedures are understood

• New procedures are used as intended.

• New procedures are adhered to.

Once stock levels are accurate, we can use the sales/week value from the QuickBooks’ report “Stock details” to improve calculation of order quantities.

Conclusion – 1/2

A&A Computers must have a well-managed inventory system, so that:

• it can improve its operations

• It will be ready for expansion.

Conclusion – 2/2

Staff of A&A must understand the importance of improving inventory procedures, and be willing to put in the extra effort needed.

The end

September 2009Alex Righolt