People close to me, know that I have been playing table tennis, also known as ping pong, for over 30 years. For the first time in all these years, there were no ping pong balls when I arrived at the club for training yesterday. For 30 years, I have taken for granted that there were balls available, but obviously these balls don’t get there by themselves and I felt pretty helpless without…The price of this little white precious object: about 1 euro or 1 CHF each. So it was not the cost that was preventing us from buying new balls, it just happened that the person who had always been buying the balls, wasn’t around for a while. And finding a shop where you can buy some on a Tuesday evening at 8pm is not an easy task!
Some raw materials or consumables may be very cheap and therefore seem trivial, but at the same time they can be very crucial to your production process
Often we experience the same in production environments. Some raw materials or consumables may be very cheap and therefore seem trivial, but at the same time they can be very crucial to your production process. We all know the examples of bolts and screws, but also, for example, packaging material. Imagine falling short on caps when bottling soda drinks. You may be able to reschedule the production line and switch to a different product for which you don’t need that specific material, but in the worst case scenario, you have to stop production because of this stock-out.
When the value of materials is low, having a little bit more in stock, isn’t always a bad thing. The cost of carrying stock for low value items is generally relatively small compared to the cost of running out of stock. Does this mean that we just have to buy a pile of materials so we don’t have to pay attention to it afterwards? Certainly not! Firstly, these materials may be cheap, but they do take up space in the warehouse, having a negative effect on your warehouse efficiency. And secondly, there is a risk that there is no clear process behind the replenishment process for these items (because everyone has the impression that they are always there). One day it does go wrong because, for example, the person who always ordered these products, is long-term ill.
Exactly because these low value items can be so decisive for your production process, there must also be a clear process of stock management behind it. This process can be very simple, but it is important that there is a structure in place. Possible solutions are:
• Min-max stocks in the ERP system: If the stock in your ERP system falls below a minimum level, you order to a predefined maximum stock. An important condition is of course that inventory in your ERP software is accurate. The stock in your system must match what is physically in the warehouse.
• Use of classic MRP (material requirements planning) in which you calculate the requirements from the production plan in combination with a safety stock. As material value is low, this safety stock can be rather on the safe side, resulting in a very low risk for a stock-out. Based on the requirements and safety stock, your ERP software will tell you when to order. The prerequisite of stock accuracy is also valid for this solution.
• Using a Kanban system, where for example you have two boxes of a material in stock in the warehouse with a kanban card attached to each of them. One box is full and the other is in use. When an employee takes the last piece out of the box that is in use, he brings the kanban card to a well-defined place, so that a new box can be ordered. You can compare this to using a common printer in an office environment. The person who puts the last stack of paper into the printer, makes sure there’s a new box of paper available. The advantage of this system is that it can be made very visual and that you don’t even need a computer for it. The prerequisite is of course that employees must respect the rules of the kanban system.
Whichever “strategy” you choose, most important is that there is a process of inventory management in place
Which of these systems are most appropriate for your company, depends on the specific situation (software, employee skills, usage pattern of the material, …. ). Whichever “strategy” you choose, most important is that there is a process of inventory management in place, so you don’t run short on “ping pong balls”, of which everyone assumes that they are always on stock…
If, after having read this article, you also feel you should have a closer look to some of your materials, then certainly do! And if you are not sure how to get started with these inventory strategies, do not hesitate to contact me at firstname.lastname@example.org and we can discuss how I can help.
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