HighJump Software

Where did my variance come from this time?

Monday, March 1, 2010 by Derek Curtis

We have hit another month end and I can’t help but sympathize with those warehouse managers and accountants working in the DSD arena. It seems that in nearly every operation running a legacy route accounting system (RAS) for its inventory solution that I have been involved with, the challenge remains the same, month end. The tasks associated with this event have grown over the years, and mean the same thing to all. In a word…Extra! Whether it is time warehouse staff spend counting and re-counting, or effort spent trying to figure out what report supports your reconciliation trouble shooting requirement, it is this “extra” effort that is tying up resources that could be used elsewhere!

After a month of daily sales / loads transactions (and of course the corresponding adjustments to both) it seems a lot can go wrong in that calculation of expected quantities for your on hand inventory! Rather than leaving this challenge for another day of “extra” at month end, here are some simple (and decidedly low-tech) steps that I have seen some of our HighJump customers use to help remedy this situation.

UPC Scanning: yes I know that your warehouse staff can recite product numbers off the top of their head, but what about that temporary receiver filling in when the regular is out sick? Or perhaps the inventory clerk who missed his morning cup of coffee? This simple act limits the exposure to human error…and it is exactly that human error that can create headaches when trying to figure out why numbers bounce all over the place during the month.

Cycle Counting: a daily count, whether it be of a select few packages of high movers, a scheduled percentage of inventory like 20% of SKU’s per work day (typically by brand/package) or a full scale review of your on hand (as required). No other single act can offer as much valuable information as this assessment. Using this information to identify potential problems and acting to resolve them now, reduces the effort significantly.

Watch the Trend(s): by watching where your inventory numbers are heading you may be able to catch the single events that are distorting your results, or perhaps even identify systemic issues present in your operations. Whether you are looking at day over day, or month to date style data, clues are waiting to be discovered that will help you trigger further investigation! Identifying that sudden spike in variance or worrying baseline trend may be step #1 in saving your company from a costly shrinkage write off in the coming weeks.

Sweat Equity: forgive me for stealing a term from one of those home renovation shows, but HighJump inventory management provides you with all sorts of tools and reports to dig further into inventory variances…the trick is, you have to use them! As a customer I have worked with for years recently said “I want to learn to fish for myself”. This request was a perfect example of wanting to work smarter rather than harder and we spent time after that learning how to dig deeper into data with tools available. Rather than using the same reports that partially satisfy your requirements, and then merging data to investigate, why not ask about alternative tools and techniques? Spending time learning how to troubleshoot your inventory challenges is a valuable investment in yourself and your company.

You can decide to continue with your status quo as your month end rapidly approaches. Or you could try to avoid that phone call from your spouse asking whether they should eat alone while you struggle to reconcile variances generated weeks ago and ask yourself – is there a better way? I certainly think so…

Comments for Where did my variance come from this time?

Wednesday, March 17, 2010 by Joe McKinney:: Derek-- Since you are in Minneapolis, if your team hasn't already done this, you might want to bounce some "count accuracy" ideas off of Target folks, as they are leading edge on detailed inventory management--back room, selling floor, DC, wherever. (Last I had heard it was very dificult to do a recount: counts introduce more inaccuracy). Then ask about "end of month"--they eliminated that in the 80's with "53 week turnover," a project that I a buyer drove to completion. Get your client out of the month-to-month humpback shipping patterns--that just preserves bad supply chain behaviors, which is not the way consumers buy. People do what they are paid to do--and average monthly inventory turnover calculation leads to humptyhump shipping patterns, receiving patterns, put away workload, and "shove it out the door workload"--all of which "53 week turnover" measurement eliminate.
Saturday, March 20, 2010 by Apolosi:: Good stuff in here. Our warehouse is fully manned by people i.e. movement of inventories in the warehouse is so much dependent on people. Hope this will do the work for me.