| ManEx Minute - 13 - Cycle Counting |
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Assembly Revisions
- Does your internal assembly revisions match the customer's assembly revisions?
- Do you change your assembly revision each time the customer changes the product even if they don't change their assembly revision?
- What issues and benefits do you have trying to match the customer's assembly revision?
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December 3, 2008
Issue 13
Greetings,
We are fast approaching the end of the year. For many of you, that means it is time for the annual physical inventory. That time of year when productivity drops and a few "lucky" employees get to spend their off time counting endless parts. It seems to be a necessary evil and just part of the industry, but is it really?
There are ways to maintain accurate counts in inventory without significantly impacting production, and without waiting for an annual count.
According to our most recent survey, you have an average of 19,400 active part numbers (you may be able to significantly reduce this, but that a topic for a future newsletter). Over 40% of you conduct and annual physical inventory. If it takes an average of 1 minute to count each part, then it will take over 300 man hours to count all the parts. That is almost 4 days for 10 people. No wonder this can be such a dreaded time of the year.
There is a better way, and for this issue, we will address cycle counting. If done correctly, this is an easy way to keep your inventory counts accurate and eliminate the need for a full physical inventory.
As always, we look forward to your participation and feedback as you gain new insights and become a more effective provider of Electronic Manufacturing Services.
Sincerely,
David Sharp
ManEx, Inc.
Business Case - Production
North Eastern Company* (N.E. Company) missed another Sales Order due date, but this time it was on a large order. The source of the delay was a long-lead component that was ordered and received, but for some reason was still short and could not be replaced fast enough to meet the delivery due date. Production blamed Purchasing for not providing enough parts, and Purchasing blamed Production for losing and wasting too many components.
Because of the importance of the order, production was very careful to monitor component attrition and was certain that attrition levels had not exceeded expected levels and therefore was not the source of the shortage. Purchasing was also certain that they accounted for expected attrition and had enough on hand, or had ordered sufficient to meet the full demand. For this reason, management suspected the issue resulted from an inventory inaccuracy prior to running MRP and not from purchasing or production process problems.
Reinforcing their opinion, management discovered that their last physical inventory demonstrated that the inventory counts were off by more than 9% on average. Although they suspected that a portion of the physical inventory discrepancy was from requiring a few "select" employees to give up an extended weekend to complete the full count each year, they were confident that a majority was caused by not adequately managing production attrition and regularly adjusting inventory levels throughout the year.
They had discussed implementing a cycle count of their inventory, but didn't believe that they had time to manage a cycle counting program or that it would make a difference. The recent missed shipments had them rethinking the possibility.
Additionally, they calculated that with their then 8% profit margin, they had to sell an additional $1,250 worth of goods to recover each $100 in lost inventory and that didn't account for expedited shipments, wasted time in production, and delayed customer orders.
It was time to make a change to their inventory management practices.
How can N.E. Company more quickly identify inventory inaccuracies? How can they promptly adjust for production attrition to keep inventory levels as accurate as possible? Would implementing a cycle count help them stay on top of their inventory and avoid component shortages and missing shipment due dates?
* Company name has been changed.
Business Case Solutions
The number of active parts and frequency of use affects the accuracy of inventory quantity records. An inventory...
Read the full Business Case Solution
ManEx Case Solution
ManEx has an integrated cycle counting module. This allows users to setup and control their cycle counting...
Read the full ManEx Case Solution
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Please share your ideas and insights on a topic below. Use the questions to direct your response. You can submit your thoughts to mym@manex.com by clicking the topic title. Where appropriate and space permitting, we will post responses in a future newsletter so all may benefit.
How do you reconcile customer and internal revisions?
Do you try to make the internal revisions match the customer's revision?
Do you make an internal revision change each time the customer changes their revision regardless of the significance of the change?
Do you make an internal revision change each time the customer changes the product even if they don't update their own revision?
How do you organize your kitting activities to keep the process lean?
What percentage of your kits/parts do you auto-kit?
What is the most time consuming part of the kitting process?
What have you done to make it more efficient?
To suggest a new topic please send an email to mym@manex.com.
To see additional topics, please click here.
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CYCLE COUNTING
"We do not perform the typical cycle count process...[we] recount all parts coming from [manufacturing] (WO-WIP) back to stock and adjust per work order. [We] use a form to handle all other parts issued not on kit for repair and scrap. [We are able to] perform inventory audits on customers due to setting up customer masters with [a] prefix."
- Mike, MS
"We schedule our cycle counting by first of all running an ABC analysis on all of our active part numbers to determine the quantity of A, B and C parts. We then automatically assign an ABC classification to each part number, the desired frequency of the counts and the plus or minus tolerance percentage for each category.
We have approximately 2,400 active part numbers. We count A parts once a month, B parts every two months and C parts every six months.
We cycle count each day between 6:30-7:30am while our stockroom is closed. We are able to do the cycle counting within an hour to minimize the impact on the shop floor."
- Joe, UT
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