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Hidden Opportunities in Storerooms

 

If you're like a lot of companies, when you complete your year-end inventory you consider that the end of the process.  Actually, that is where a lot of the opportunity for process improvement actually begins.  This year, think of "the end as really the beginning" and look for ways to increase management and controls.  Here are 3 to consider:
 
1. Establish a sustainable stocking policy. 

 

Often, a great deal of time and energy is focused on how to make distribution operations more efficient and secure.  Equally as important however, is determining what items and quantities make sense to keep.  A good, meaningful stocking policy that is based on demand/consumption with scheduled reviews can help improve service, reduce waste and optimize your inventory investments.    
 
Multiple storage locations throughout a system can be a decentralized sieve through which a lot of product can seep.  Begin by making sure that you have adequate measurement tools in place for each of these locations.  Establish controls and metrics for reconciling the ins and outs.  Also, this is a great place to establish a written policy about storeroom stocking.  Identify the who, what, when and where of the process, then distribute it widely so all impacted constituents know and understand any changes you are making to the process.  This should help to alleviate any adverse impacts on patient care from out-of-stocks.     
 
2. Set and manage stocking levels. 

Closely aligned with the notion of establishing a storeroom stocking policy is the need to set and manage stocking levels. At the most basic level, if you don't have targeted stocking levels with demand planning tools to help establish reorder points, you will need to develop some and use them as a way to control the amount of product needed.  Companies who do this find that they can provide high levels of service with less inventory and associated storage space.  
 
Companies installing stocking levels for the first time should look to do it with an automated demand planning and forecasting system.  For those doing it manually, it is a great time to evaluate the returns associated with putting in a system (or extending an existing system) to provide more robust reporting and tracking.   It is often NML's finding that new warehouse related systems provide more value on invested dollar for inventory control than actual FTE reduction or redeployment.  For maximum return be sure to focus on your system's inventory control features.
 
For those organizations already using automated stocking systems, one way to potentially find hidden savings is to look at when the last time was that you reviewed and set your metrics.  We find that time has a way of slipping by and it can be surprising how long it has been since you "tweaked the system".  If your usage, out of stock history and reorder points have not been reviewed recently, it is probably time to calibrate your metrics, dialing up or down reorder points to better fit your applications.     
 
3. Review and act on your obsolescent inventory.  
 
You've invested hundreds of hours in taking your physical counts.  You've also spent countless hours trying to understand, decipher and resolve the variance.  While you are digging into the details and making adjustments, consider doing an obsolescence review.
 
Typically, there is some percentage of every organization's inventory that becomes stagnant and virtually forgotten.  These SKU's often have very small turns and/or extremely low counts.  Many represent broken lots or cases.  Some products have been replaced, updated or  discontinued.  Some are no longer used in your organization. 
 
If you haven't analyzed your inventory to look for these types of products in a while, you may find that you have hundreds, or even thousands, of product codes in this category.  Rather than allow these items to continue to occupy valuable shelf, bin and system space, they should be removed. Obsolescing an item involves removing it from your inventory as well as your system so that it can not be reordered.  From an accounting standpoint it is written off of the books.  Physically speaking, obsolesced products can be sold to a broker who deals in just this type of items, who will sell it into other applications or even other countries.  Another option is to donate these items to charity.