• Do any of the following scenarios sound familiar? Your largest customer calls the Distribution Center to place an emergency order for one of your products. The order is for 1,000 units, needed the next day. The customer service agent taking the order checks the inventory in the computer system and, noting that you have 1,400 units on the shelf, guarantees your customer the order will be shipped overnight. However, when the packing slip comes in to customer service that afternoon to invoice the customer, only 600 units have been shipped. The rest have been bordered. In a panic, the customer service agent checks the computerized inventory. According to the computer, there are still 800 on the shelf! What happened? What will you tell the customer?

• You are manufacturing items for an important order that must be shipped on Friday. One of your employees alerts you that a key piece of equipment needed for the order has broken down. You place an emergency call to the maintenance supervisor, who checks out the machine and determines that it needs a new motor. “Not a problem” the supervisor tells you, “We have 3 motors in stock”. Two hours later, the supervisor calls you back “You know those 3 motors that I told you about? We checked the shelf, and we don’t have any. We called the motor supply center, and it’ll be two weeks before they can ship us one.”

• Last year was a tough year for your company. The recession cut into sales and you had to lay off 20 percent of your workers. However, recently things have begun turning around. Sales have been growing and profitability is up. It looks like everyone’s hard work has earned them a profit-sharing bonus, the first in three years. You’ve just taken your annual physical inventory, and the Controller calls with the results. “You know that profit that we’ve been celebrating? Well, it looks like we celebrated too soon. We suffered an inventory loss so large that it turned our profit into a loss!”

Inventory inaccuracies are the bane of most businesses. You may think that when your inventory figures are off, it is an accident. In reality, it isn’t an accident. Something has gone wrong. Until you find out what has gone wrong and fix it, it will probably continue to plague you. Most companies that have studied the problem have concluded that 80% of inventory errors are caused by either improper processes and procedures, or the lack of processes and procedures.

In many cases there exists undiscovered the gaps in your procedures that are currently causing your inventory figures to be inaccurate. For example, an employee goes to the crib to get 100 parts to do his job. The attendant gives him 100 parts, and everyone is happy. At the end of the day, it turns out the employee only needed 70 parts, so he brings the parts back, thinking the attendant is going record them as being returned to inventory. The attendant takes the 30 parts, thinking the employee is going to record that only 70 were used. As a result, nobody recorded the parts went back into inventory. If this is the employee’s responsibility, it could happen once a day, whenever he returns parts. If it is the attendant’s responsibility, it could happen over 100 times a day, whenever anyone turns parts in. In this case, new procedures are needed to clarify whose responsibility it is to record parts being returned to inventory. After devising a program to repair the damage, your employees can be trained to employ new techniques to not only improve your inventory accuracy, but keep your inventory accurate.