Infor CloudSuite Industrial APS best practices #3 – Count to fix the process

April 26, 2018

The last thing you want is to tell APS that there are materials in stock, have APS calculate a date you can ship to the customer, make a promise to the customer based on that, and then find out that, dang it, there was no material there. Somebody forgot to record that it had been used!

You don’t want the opposite either. You don’t want to have to tell a customer that you can’t ship their order as early as they’d like because you don’t have the necessary materials when the fact is that you actually do have the materials in stock.

You also don’t want to deal with the cost of expediting that comes with these situations. So how do you fix them?

You do cycle counts, but not for the purpose of correcting the counts. Yes, you’ll make necessary adjustments when you see them. But in this approach, you count to identify recurring problems so you can fix the process and eliminate the issue in the future.

Below is another straight-talking post by Jim Black, former director of Infor Consulting Services, explaining more about this approach.

“Keeping inventory records accurate” by Jim Black

There’s that word again— “accurate.”

In this context, an item is considered to have an accurate inventory record if the balance on hand is within tolerance of the physical count.

Each item, potentially, could have a different count tolerance but in all likelihood, nearly all of your Items will have a count tolerance of +/- zero. It may be appropriate to apply a count tolerance to those items that cannot be easily counted or measured, like paint or other liquids. For example, your inventory records indicate that you have 25 gallons on hand. Using a dipstick (or maybe a weigh scale), we calculate that there are actually 21 gallons in the drum. As our count tolerance for that paint Item is 5 gallons, we give this Item a pass; however, we would still process an inventory adjustment of -4 gallons.

Standard CloudSuite Industrial (SyteLine) has no field for recording count tolerance, and one should be added somewhere on the items form with a personalization. The field should accept a number, not a percentage. That number should represent the average days of supply and, in my opinion, should be set to no more than 5 days’ worth (i.e. a week). In fact, the default value should be zero, and the vast majority of your items should remain at zero.

Now, our measure of inventory accuracy is the number of items within tolerance as a percent of the number of items counted.

That is: If we count 100 different items (SKU’s) and 96 of them are within tolerance, then we can report our inventory accuracy to be 96%. And yes, an item with a loss of 100 units counts the same as an item with a gain of 1 unit. Assuming both differences are outside of tolerance (whether tolerance is zero or something else), both are counted as wrong. It does no one any good to make a distinction between the two. Wrong is wrong.

Note: I do not recommend that location errors be included as inventory accuracy errors. Material not being in the recorded location can be a problem to be sure, but it’s a very different problem from the inventory on hand balance being wrong. Mixing the two will only hobble problem-solving efforts.

If you accept the APICS definition that “the key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the error,” then you will probably agree with me that the whole ABC concept is archaic. It is a decades-old notion predicated on high-value and/or fast-moving—as though those attributes have anything to do with inventory accuracy.

You ERP historians will know that the use of ABC classification in inventory management was a concept developed by GE in 1951 (ABC Inventory Analysis Shoots for Dollars, Not Pennies). It is a crude application of the Pareto principle, and not a synonym for it as I so often hear. In 1951, thirty years before the advent of computers and MRP, humans couldn’t possibly cope with the volume of things that were the reality in manufacturing at that time. ABC was an approach to “scientifically” justify which things to focus on and which to ignore even if ignoring things is perilous (as it is). Tell me, when you’re making a bicycle, which component is most important? Which is least important?

When you look at things in that practical way, you must deny the nonsense that was justified for a paper-based world. The truth is, every component is equally important—even the lowly decal—for without it, the bicycle cannot ship. That’s always been true, but not since the 1980’s have we had the technology to help us cope with the volumes.

In truth, the ABC technique is nothing more than some silly technique for prioritizing when you will count all of your Items throughout the year, as though counting all your items is a good idea. It’s a sneaky way of doing the annual physical throughout the year but does nothing to help us with “error-cause-removal” (as Philip Crosby would say in Quality is Free).

Instead, we need an approach that will enable us to find errors and pinpoint the flaws in business processes that cause them. Eliminating these errors will strengthen the underlying business process and improve the accuracy of all transactions going through that processes—not just the high-volume, high-value items.

My message is clear. Forget ABC. It’s ineffective, as it assumes every item is independent of the next and is designed for a paper-based world. Embrace control groups, which recognize the need for matched sets of parts and focuses on fixing the process—especially the production reporting process.

What’s next?

I know you’re wondering: what does he mean by “control group”?

Well, we’ll share that in the next post.

To figure out how to use APS at your site, you need to first know how it works. To learn that, take the self-directed APS course on Infor Campus. In that course, you will get hands-on practice with the seven steps of planning with APS, including all the key APS forms and fields.

Register now. (Outside US)

About the author

John Brown | Education Product Manager, Infor
John is the Infor Education program manager for CloudSuite Industrial, CloudSuite Business, and CloudSuite Industrial (SyteLine). He joined the Education department in 1999, back in the Symix days.

Filed Under
  • Education & Transformation Services
  • Industrial Manufacturing
  • CloudSuite Industrial (SyteLine)
  • Worldwide
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