If your boss is like most, they are probably impressed by measurable results, such as the dollar value of cost cuts and percentage increases in efficiency. When managing indirect inventory in a manufacturing facility, though, it can sometimes seem that significant, measurable changes require a major effort, such as months of meetings seemingly involving everyone from the security guard to the chief financial officer and an elaborate rollout plan.
You probably don’t have the time for that. But there are a few quick and simple adjustments you can make that will lower costs and improve efficiency:
Segment your inventory. The vast majority of your indirect supplies can be categorized into one of four buckets, based on their cost and usage, namely
- high-cost and high-use inventory
- low-cost and high-use inventory
- low-cost and low-use inventory
- spot buys.
Managing all of these buckets of inventory the same way is a recipe for excess costs. Instead, think strategically about how best to manage each category.
For high-cost, high-use items, maintain strong controls. This means ensuring that you keep enough of these items in stock but also preventing unnecessary usage or early reorders.
You shouldn’t spend a lot of time managing low-cost, high-use items. As much as possible, make these items available when and where needed to keep production moving.
Low-cost, low-use items are susceptible to being over-inventoried. Maintain minimal inventory levels and reorder only when needed to avoid overspending.
Spot buys cover items that you don’t keep in inventory. For these orders, you need an efficient process and reliable supplier with the maintenance, repair and overhaul supplies that you need when you need them.
Balance centralized inventory with point-of-use storage.
With your inventory properly segmented, you can look at where things should be stored and managed. Many facilities store everything in a central crib, but there’s a problem with this. Workers often end up taking more of the frequently used items than they actually need in order to avoid time-wasting trips. This means employees are hoarding inventory, which can distort records and require frequent reordering. Imagine you have just five operators hoarding three weeks of inventory. Pretty soon, you’ll be ordering too much, spending more than you have to and wondering why.
Consider managing high-cost, high-use items with a vending machine near operators’ work stations. This makes the items easily accessible while maintaining accurate inventory records and accountable usage allocation control.
It may not be worthwhile to store low-cost indirect inventory in a centralized crib because of the associated inefficiency and cost. Instead, making these items easily available in a convenient location — or multiple locations — may be more efficient.
Secure the crib. When numerous employees need inventory from a crib, it is tempting to make the crib semi-secure and rely on associates to fill out inventory forms and keep records updated. But more often than not, workers going to that crib are focused on getting what they need and getting back to work. Soon, a wide discrepancy between what’s in the crib and what inventory records show develops.
Inaccurate records create other problems. Inventory may run out and be unavailable when needed, even though the business system shows it to be on hand. This can cause production slowdowns. Associates may stop relying on what’s in the crib, hoarding extra inventory at their work stations because they can’t be confident they’ll find what they need. Again, this can spur early reorders and create excess inventory levels.
Fully secure the crib, by tracking inventory with automated tools, to optimize inventory levels and better manage costs. What does a fully automated, secure inventory crib look like? Here’s an example: When an operator or maintenance worker needs something from the crib, they request the item from the crib manager. The crib manager removes the item from stock; scans the bar code to automatically update inventory levels; and then either gives it to the worker or, in some circumstances, delivers it to the appropriate workstation. The technology and extra labor have a cost, of course. But in the long run, such systems save much more money, creating a net gain for the facility.
Control your indirect costs using these three easy tweaks. Your boss will surely like the measurable results.
