Managing inventories is of vital importance for a company. I am not talking here about the greatest Muda that lean production speaks of. I am talking about controlling inventories with the IT we know. My experience has shown that a considerable number of companies in Turkey do not know their inventories, and therefore do not know their costs or their profit position. That being so, they essentially have owners and managers who make decisions the way one drives a vehicle in thick fog, with eyes closed and entirely by feeling. What is interesting is that there are quite a few managers and owners who think that, once they make an agreement with a software company, they will control their inventories. They put these thoughts into practice as well, and the result is companies that spend millions of lira and still cannot control their inventories.
Software companies, for their part, step outside their own field and, supposing that an inventory management system is something that solves itself once the software has been built, put into practice solutions one could not imagine, and what emerges here too is Excel tables transferred into IT software.
Yet inventory management is a system in its own right. Whichever software you do it with, if you do not set the system up correctly you have no chance of a successful application in inventory management. It is exactly at this point that lean logistics, an important part of the lean production system, comes before us. Together with lean logistics, many concepts have entered the processes of inventory management. In this way inventory management finds its real worth. Maximum efficiency is obtained from the software, and inventory, one of the most important of the 7 Muda, can be brought under control. Let us touch on what must be done on the software for lean logistics and inventory management; let us try to explain the related concepts; let us talk about examples of application.
1- Master data for inventory control must be complete and integral. Lean logistics software systems define the master data required for inventory control as follows. The concepts given are data that must be provided in addition to the basic data required for inventory control — for example stock code, name and unit, and accounting codes, and so on. - Acquisition lead times: supplier production time, transit time, transfer time, order-preparation time, and so on.
- EOQ; economic acquisition quantity; economic order quantity, production quantity, and so on. These must be calculated on the basis of the cost of consumption and of acquisition.
- - MOQ; minimum acquisition quantity; minimum order quantity, production quantity, and so on. These should be calculated by working together with the supplier, or according to the costs of production changeover.
- - Packaging information; packaging types, quantities contained in a package, package volume information, and so on.
- - Acquisition types; determining types such as supply to stock, supply to order, subcontracted supply, and so on. Here the item in question will need additional data according to the appropriate supply system. Of these, maximum stock quantity, safety stock quantity, and lot size are the most widely used.
2- In inventory control, the physical situation and the path followed on the software must be the same. In many companies there is a gulf between what is defined in the software and what actually exists. The general tendency can be described as the software reflecting, exactly, what people are used to. Especially in SMEs that will start using software for the first time, this situation brings disaster with it. For example, a company that uses sheet metal was saying that it practiced inventory management by receiving and issuing, in kilograms and under this code, all the sheet it had coded as ST37 — unbelievably, even the semi-finished goods cut by plasma. The software company said nothing about this, on the grounds that the company officials wanted it that way. The result was a company whose inventories could not be controlled. In addition, many companies carry out practices such as virtual warehouses, dumping stock that does not exist into a count warehouse, material transfer, and shipping next month's production as if it had been produced in the previous month. While defending these, the argument they take refuge in most is built on there being no other way to make a sale. Yet for inventory management to succeed, the most basic rule is that the counterpart of every physical practice is represented on the software in exactly the same way. Of course these practices must be correct practices, and must not run contrary to generally accepted inventory rules. For example, my indispensable rule is first the recording transaction, then the physical movement, which closes the door here on many absurd practices.
3- The measures that will avoid waste in inventory management must be taken from the very beginning. What we are speaking of here is the inventory itself, and also, during inventory control, taking account of Muda such as excess processing, excess transport, excess walking, waiting, and so on. For example, the approach of all the warehouse employees, when giving product to production, is to give production as large a quantity as possible so that the stock is handed over immediately because it is urgent, and to carry out the transaction afterward. Yet inventory management and lean logistics say that a milk-run must be applied. This means tending to issue as many varieties as possible.
4- Jidoka must be applied. As you know, the basic principle of Jidoka has been defined as: stop when there is an error, and give feedback. That is, when there is an error related to inventory, one must stop and cut off the progress of the system. Many software companies have developed applications that allow the transaction to be done at a later time. In fact, although this practice was developed so as not to keep the customer waiting at supermarket checkouts, and so that errors which arise, even if rarely, do not put the company in a difficult position legally — and although these are good practices — when software companies apply it to production as well, and moreover apply it without having set up the recipe and routing infrastructure and change management, they leave the planning and purchasing units unable to work and unable to keep inventory. They also say, do it correctly and these errors will decrease. Yet the person who closes the work order in production is not even aware of the problem. How are they going to do it correctly, if they already believe that what they did is correct?
