Avoiding an Inventory Stock Out – A Manufacturing Challenge

“A horse, a horse, my kingdom for a horse” cries King Richard III in Shakespeare’s well known drama – and you may well ask what relevance does it have to Starting Your Own Business With No Money the manufacturing world!!! Closer consideration of this quotation allows us to draw a number of analogies to an out of stock manufacturing situation.

there is a desperate need for an item that appears to be currently unavailable

the value of the item has risen dramatically Product Competition Examples to the party wanting it

locating a replacement item becomes paramount

and any delay in obtaining the item may prove fatal

Harsh analogies perhaps but there have been many instances where a manufacturing operation has foundered because of poor purchasing policies and a lack of inventory control. It is one thing to have the ability to fabricate and assemble the required order. It is a very  different matter to ensure that all the component parts and material are available on hand and that they can be readily located when required. This takes us into the realms of purchasing procedure and inventory management both of which are key components in the manufacturing process.

In a previous article in this series, entitled ‘Estimating – A Key Profit Parameter for Manufacturers’, it was noted that accurate estimating and costing of a job is crucial to a profitable outcome. However, no matter how accurate the cost estimation, it is of limited value once manufacture commences if the material and consumables needed for the job are not available when required. The lack of a component or the inability to locate its whereabouts will often materially impact the flow of a job through the shop. Typically this may result in one or all of the following scenarios

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urgent ordering and delivery of the item

diverting or delaying manpower resources to locate the item

delays at a work station with a partially completed item

reconfiguring machines to take on another task

rescheduling of other activities on the shop floor to accommodate the delay

reallocation of labour

Unavoidable delays and mishaps do occur on occasions but these should be the exception rather than the rule. If there is a high incidence of urgent ordering or the shop floor seems to be in a frequent state of turmoil, looking for components or consumables, then it is almost certain that there are some serious issues that need to be addressed.

Urgent ordering is a classic symptom of a purchasing system under stress. Provided that an inventory is being properly managed there should be very few urgent orders placed. Inventory management requires good interfaces with the estimating process so that the requirements for a specific job are known before a quotation becomes a firm order. Once the manufacturing order is confirmed timely component and consumable ordering should follow in an measured manner.

Proper inventory management must also include

maintaining appropriate levels of stock and components based on well developed max / min figures

the timely placing of orders to avoid stock outs

appropriate receipting of items so that their delivery is recorded

a well defined storage location numbering system

and a stock reservation capability that quarantines stock items for specific jobs

In times past many of these requirements were difficult to manage and track, particularly for small to medium manufacturing companies.  With the limited manpower available in a smaller organisation manual systems were prone to error and their timeliness was often suspect as staff tried to keep up with the paper trail and work flows. However today with the ubiquitous and cost effective desktop computer smaller organisations can now compete on an equal footing with large and complex organisations provided they select suitable software.

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