Apr
20
Where an organization has a large volume of inventory – carrying out regular checks to ensure that the correct stock is available can become problematic and time consuming.
Cycle counting is a popular tool that can be used to aide the process, putting in a structured system to prove the accuracy of stock information. Strictly speaking, cycle counting is a sampling technique where certain parts of the inventory are reviewed and the results used to imply the robustness of the inventory as a whole.
The typical process is that the ERP system will generate a list of inventory locations to audit, these will be inspected and findings entered back into the ERP system. For example – The ERP system may say to check stock Location A1001 which should have 987 of part ABC123 – the location is inspected and it’s found that 980 parts are present – this information is relayed back to the materials controller who will make the necessary amendments (-7) in the ERP.
Cycle counting using random samples
Perhaps the most common implementation of cycle counting is that of utilizing a random sample.
This means that at each check a random location is selected (typically by the ERP system) the locations are then checked and the results fed back in. This routing happens periodically (in many organizations this is done daily with a set percentage target of inventory to be verified over a given period).
An alternative approach is to conduct several random sample checks to achieve a level of comfort over the findings and then conduct the cycle count on a particular product or range of stores locations using those results as the indicator for the larger warehouse. This method works well where the warehouse is full of comparable products but less so where there is product diversity.
ABC driven cycle count process
ABC Analysis is a method that is often used to segment inventory. Where the organization has an inventory that is diverse in product type and cost – traditional cycle count processes are not appropriate as they do not account for values.
ABC typically segments inventory by cost with the most expensive items being categorized as ‘A’ items and so on.
Before undertaking a ABC driven cycle count process an ABC analysis will need to be carried out (in many ERP systems the results can be stored within the database to help drive cycle count processes.) The structure of the cycle count is that the ‘A’ Class items will be checked / counted more frequently than the ‘B’ items which in turn will be counted more than the ‘C’ class items.
Problems with cycle count processes
Cycle count processes are not without their issues.
• The process can be particularly resource hungry for organizations with large warehouses/inventories
• Administration involved in producing check sheets where it cant be automated
• The inventory accuracy of items not counted may be low and counted items may not be representative of the overall inventory
• Write on / Write Off processes and financial authorisation to change stock figures need to be robust
Apr
18
Winning with a successful procurement tendering process
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While the use of competition between suppliers offers a simple and effective route to savings through allowing a number of suppliers to compete over a given range of equipment / commodity – a lack of clear process and robust information can result in issues.
Competition works best with both a clear specification of requirement coupled with a clear process of how the competition / tender will work including a suitable supplier scoring method.
The tendering process can become overtly complicated and messy for a number of reasons – namely :-
Supplier Pre-qualification
Your process may include supplier down selection prior to tender issue. This enables you to review the market place first – inviting potential candidates to apply before measuring key requirements you might have on that supplier (for example capability, quality, process etc). Often this stage is carried out by utilizing a pre-qualification questionnaire which is sent to suppliers and then reviewed on completion. Where problems occur it is usually down to unclear ambiguous questions which are subjective at best. It’s crucial to ensure you waste neither the suppliers or your own time and ensure any pre-qualification questionnaires are targeted concise and relevant to the package being tendered.
Vague specification documentation
Tenders often hinge on the business need or requirements and its crucial that you convey your business need in clear and precise detail. Ambiguity can result in either each supplier trying to do their best resulting in different interpretations or swamping you with questions – both of which result in your evaluation and award far more complicated than it needs to be.
Feedback and FAQ
Ensure that you have suitable points of contact available for questions and issues that might arise from issuing the tender. Ensuring that you have the correct support structure in place to clarify any details is vital to the success of your RFP – without you might find suppliers that do not submit a proposal!
Selection criteria
Selection criteria should be considered at the beginning of the process – ideally ensure that your suppliers complete their proposals in a standard format that can be easily scored and compared against each other – where you may have a number of requirements you should break these down into appropriate sections – where the quotation might be formulated from a number of different inputs (e.g. materials and services) consider what weighting will be applied to each.