FASHION PUTS ITS LOGISTICAL CAPACITY AT THE SERVICE OF THE GOVERNMENT

The fashion giant Inditex will donate around 300,000 surgical protective masks to the Spanish state and is exploring giving up part of its textile manufacturing capacity for the manufacture of medical equipment. This week we have studied concepts of distribution networks, but in this post I would like to emphasize that the situation in Spain and in some countries of the world is so critical that the inventory of sanitary material is… COMPLETELY NON-EXISTENT.

Zara returns to its origins, but this time to fight the COVID-19

The production lines work against the clock, countries like China are starting to send quantities of gowns, masks, etc., to Spain, other countries like Italy, despite the aid received, are so many people infected by coronavirus that they do not have enough material to supply all those who need it.

Here is a link to a video of the mask production line:

Complete Automatic Face Mask Production Line

However, other designers integrated in ACME (Asociación de Creadores de Moda de España) such as Andrés Sarda or Dolores Cortés have also ceded their workshops for the production of sanitary ware. All united in the fight against the same enemy.

If you want more information I leave you several links that deal with the subject.

www.lavanguardia.com/vida/20200319/474260118566/firmas-de-moda-ponen-a-disposicion-sus-talleres-fabricar-material-sanitario.html

www.expansion.com/empresas/distribucion/2020/03/18/5e725516e5fdea2c468b45ce.html

INVENTORY LEVEL

When you create or work with products or materials, you must have a determined level of inventory in the warehouse to prevent breaking stock. If your stock breaks, you would not be able to serve customers and, consequently, you could lose them. For this reason, it is advisable to create a model that fits your demand and also create an inventory ordering system that fits your model. You should avoid having more inventory than necessary stored, which would increase the costs of storage, or to have less inventory than necessary, which could lead to breaking stock.

The reorder point method and the periodic review method can help us to achieve a level of effective and efficient inventory. These methods are explained below.

The reorder point method (ROP) is based on the request of some products to your supplier when the available quantity in your warehouse is below a certain level. As it is shown in the Figure 1, the quantity requested should cover the period from the reception of an order until it returns to receive another order. We should take into account the demand and the standard deviation to calculate the reorder point (R) because we should have enough product in stock to cover the period L.

Figure 1. Reorder point method graphic. Source: <http://www.infosysblogs.com/supply-chain/2013/01/rop_using_apo_ctm.html>

As it is shown in Figure 2, periodic review method is based on the periodic review of the inventory. When we check the inventory level we see if it is below the determined level. If it is below the level, we request product, if it is not below the level, we forget the inventory until the next review.

Figure 2. Periodic review method graphic. Source: <http://www.supplychainmusings.com/2008/05/replenishment-policies-and-inventory.html>

For example, if you work in a hospital pharmacy you need to have always the drugs that the patients need but you have a limited space so you have to control the inventory. You can apply the periodic review and check the inventory one time per day, but the best way to control the inventory is to have a reorder point because, thanks to the barcodes, the number of drugs in stock is always controlled and you can request more when the stock arrives to a certain level thanks to databases.

 

References:

https://docs.oracle.com/cd/A60725_05/html/comnls/us/inv/roplan.htm

Aurea Jordán

The mystery of lost inventory – Inventory Discrepancies

In the last session we were talking about inventory control policies and different types of stocks. Talking about inventory I remembered a problem that I have observed at both companies I have done an internship at. Both times I have worked in the Accounting office and sooner or later we noticed that the inventory in our books and the inventory in our warehouse did not match up. One time this occurred because an employee just had not billed our supplies. The other time inventory had been thrown away which was not recorded in the books. Therefore I figured that this might be a quite common problem that occurs in many companies and is therefore an interesting topic for this blog.

So let’s see: What are the most common reasons for inventory discrepancies?

1. Stock loss due to damage
2. Stock loss due to theft
3. Stock is in the incorrect location
4. Human error during stocktaking process
5. Stock is labelled with an incorrect identification
6. Stock is mistaken for a similar product
7. Inbound stock was not recorded accurately
8. Faulty inventory management software or stocktaking equipment
9. Incorrect unit of measurement was counted

The next question would be: How do you find inventory discrepancies and how can you resolve them? At least once a year every company should do a physical count of all their stock. When doing this all discrepancies should be revealed and afterwards the reconciliation (analysis, explanation, accountability) starts. If inventory discrepancies are found the following steps can be taken to resolve the problem:

• Re-count the stock in question. To make sure it wasn’t only a simple mistake during the counting process this should be the first step if numbers aren’t matching up.
• Check if the stock exists in another location. Double checking if the stock can be found in another part of the storeroom, another storeroom or even still on the truck of the supplier is especially important if a large number of items is missing.
• Make sure the correct unit of measurement was used. Even though all people participating in the count should be trained on the procedure still someone may have counted in liters or pounds, instead of boxes or individual units.
• Verify that the SKU or product identification number is correct. To make sure products are not labelled with the incorrect SKU check that the description in your inventory management system actually matches the product you’re counting.
• Ensure the product has not been mistaken for a similar product. This might happen when the counting staff does not realize that a variation in size or color is technically a different product with a different identification.
• Scan your inventory records for errors. A discrepancy may come down to a simple mathematical error or typo.
• Confirm that there is no missing paperwork. Search for any missing paperwork, which may not have been entered into your system yet to make sure that sales which have been unaccounted are included.
• Investigate whether employees or customers have been stealing stock. This is an unpleasant steps but necessary to find a logical reason for loss of stock. Maybe tighter security measures, such as CCTV cameras or security tags on products should be considered.
• Speak to your warehouse/storeroom managers. Talk to your managers to see if there was anything unusual during the stocktaking process. If so, some staff may need retraining or the entire procedure needs to be revised.

Nowadays many companies use cycle counting for a more effective inventory management. Cycle counting means verifying the on-hand quantity of a specific number of products on a day to day basis. Nevertheless some products might be counted more frequently than others (for example an ABC analysis is conducted to determine products with a high value or turnover rate which are therefore counted more frequently). Compared to a yearly physical inventory, cycle counting is supposed to increase inventory data accuracy and improve customer service levels. The schedules for cycle counting may vary from business to business. They are determined by taking into consideration the inventory value, flow through rate, warehouse activity levels and staff availability.

As I already wrote a lot you might want to get more information about cycle counting by watching the following videos.

https://www.youtube.com/watch?v=He2zvhLANl8

Sources:

https://www.prognostore.com/blog/resolve-stocktake-discrepancies

http://effectiveinventory.com/reconciling-cycle-counts/

http://www.inventeksoftware.com/downloads/Articles/how_to_attack_discrepancies_in_inventory.pdf