Why You Need a Manufacturing Software Tool to Manage Your Inventory - Part 2

Almost every manufacturer has the bulk of their expenses tied up in facilities, people, and inventory. This triumvirate of resources makes your shop run, but in the wrong set of circumstances, it can also be the very reason that you just can’t seem to make and ship your product on time.

We focus on these areas with every manufacturer we work with. If they don’t bring it up in our early assessments, we discuss it in-depth post-installation. Getting just the right dynamic between these three areas is key.

While many consultants may talk about your people and your processes, few may focus on how the troubles you experience in inventory are affecting your orders, your delivery, and even your interdepartmental coordination. With as much money as you have wrapped up in inventory, we put a larger focus on it earlier in our discussions and our work.

Production control for your INVENTORY

Whether you are using an Excel sheet, a finance package, or even an ERP to track your inventory, you may not have an accurate count when you need it most. Do you know the exact quantity you have of each material or part you use in production? How about the finished goods inventory you make? If your system tracks it accurately, you should be able to answer either of these questions at any time within a percentage or two of the exact number.

Let’s take it a step further. Do you know how much inventory you need for your current work orders? How about what trends would tell you about what you will need next week and beyond? Do you know if you are trending above or below this time next year with your current demands on inventory?

In order to be competitive today, especially with the current supply chain challenges, you need real-time control over both inventory and your work, in order to know that you can get it all done on time. Gone are the days when you can spend more money to get more inventory overnight. The cost of goods is high enough already without paying for overnight shipping. And your suppliers may push you to pay more for the inventory itself if they know you need it quickly. So how do we get accurate information?

Why a traditional MANUFACTURING schedule won’t work

An ERP is the best shot you have at inventory counts outside of a true manufacturing software system and even this falls short in getting you accurate inventory information. Let’s talk about why. ERPs are systems that count and track things – invoices, cash, purchase orders, employees, hours, and dollars. They can add and subtract individual counts in these areas; some are even able to track when you’ve gone above or fallen below your threshold. You start the day with 28 widgets, you added 5 through receiving, you used 2 in production and now you have a remainder of 31. It’s math we can all do in our heads.

A manufacturing software system knows how much of each item you will need on any given day. It knows where it will be used in production (the first step in a process versus the last one) and, with this information, it’s armed with the power to drive what you do where and for how long.

Let’s talk about the consumption of wire in manufacturing to make the point as it’s easy to see the power of a real-time, completely accurate, manufacturing software tool in this setting.

Wire, like paper and steel, comes in huge coils or rolls. You select which spool you will use for the work you’re doing and the manufacturing software will know exactly which step of the process needs it. This is a natural integration between inventory management and the Bill of Materials (BOM) for any process you have. When the roll is brand new, you know exactly how much wire is on it; at any other point, there’s a very good chance that the number on the card counting the remainder on the spool is wrong.

When wire cable is cut (and this applies to any material you cut for use) it leaves a raw edge. This is unlike inventory you pick. That raw edge gets ragged over time and won’t make it long in your inventory area without some kind of damage, no matter how small. The next time you pull that same wire spool out, you will need to clip the end to get a new, clean cut. Over time, those little end trimmings leave you with much less inventory than you think you have and it’s rare, if not impossible, for your finance system to know about, track, or solve this issue. Chances are, and experience tells us, that the operator you hand the spool to is the unfortunate one that figures it out when they have a large order to fulfill and only get partially complete before they reach the end of the spool (available quantity).

Why an ERP can’t handle it

The ERP doesn’t know you’re short on inventory; the operator trying to do the work does. That’s a problem. The operator has to stop or move what they’re doing. If you’re lucky enough to have sent them a list of work to do, they may be able to do the next job; however, that job you were planning on completing is now sitting idle. For how long? Do you know the average on your shop floor? ERPs cannot track deadheaded work. They don’t know how long it’s been there, where it’s going, or how much longer it will take to do the work. If you miss your ship cycle, are you even likely to be able to provide a new ship-date that you can stand behind?

What you need for manufacturing inventory management

Look for a solution that tells you what you have, where it is, and used, for which types of orders. It should be able to compare the quantities of inventory you need to complete the sales orders your team has processed. Those are cash in-the-door and you need to get those out. It should be able to track all the orders “in process” and all the inventory on-hand, so minute-by-minute, it can warn you if you’re over-selling what you have in stock, whether that’s a finished product that you’re packing and shipping or a product you are going to produce today.

A true inventory management system should be able to give you a complete genealogy of the inventory. Where did you get it? From whom and when? How much did you pay and is there a use-by, effectivity, or expiration date that you want or need to track?

Taking it forward from there, where did you use that inventory? On what order? When did you make it? Who made it? Who did you ship it to?

These are common problems that remind me of a Steve Jobs quote that “simple can be harder than complex.” We see it every day. The simplest problems are the most complex ones for manufacturers to solve. Ask the person in your organization that tracks down paperwork how long it takes to tell you what specific inventory was used in an order last month. The amount of time that it will take them, assuming the entire production went according to plan, is going to be less than when things didn’t go well. It can swallow whole work cycles.

As always, we’re here to move the conversation forward with you. If things we’ve said pique your interest in what’s possible for your shop, reach out and ask us the questions that you have. We’ve been doing this for more than 25 years and we’re happy to share our insight with you.

Over the course of this project, we will identify critical issues we see, what’s causing them and what you can do to stop them. We’ll go through almost 20 areas before we end this series on how to buy a system. These pieces should serve as a step-by-step guide to get you there.

Ready to move forward faster? Engage with us to talk about assessing or mapping your systems and processes.  We’re only an email away, info@cimx.com.

Contact CIMx Software to see how paperless manufacturing can improve inventory control for you.