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Quantity Control: Just as Important as Quality

Control
“Quantity control” . . . “item balance integrity” . . . “record accuracy.” Each of these terms means the same thing to a manufacturer:
the ability to know what you have in raw material, work-in-process, and finished goods, and how to find it when you need it. The
accuracy of inventory on-hand balances are of great importance to any manufacturer, especially those operating within a closed-loop
MRP II system. In an MRP II system, inventory record accuracy determines the level of system performance and serves as a clear
measure of the system’s quality.

Quantity Control Through Cycle Counting


Although record accuracy is primarily a function of the stockroom, every department in your shop has a profound impact on the
accuracy level that can be achieved and maintained. It’s important that upper management promote the idea that record accuracy is
really everyone’s job.

The most recognized method of purifying and improving record accuracy is cycle counting. Cycle counting is different from
traditional inventory-taking in that it identifies and attempts to eliminate the causes of record inaccuracy. There are numerous
recognized methods of cycle counting; the most common are “A.B.C. Analysis,” “random to the universe,” and “the frequency
method.” Cycle counting techniques include hand counting, scale counting (including standard scale-count quantities), location
planning (keeping active items close to an aisle or scale), prebagging (establishing a standard prepackaged lot size), special containers
(e.g., Kanban, visual observation counting), and bar coding for quicker and more accurate identification and counting.

Measuring Record Accuracy


Manufacturers who don’t measure stockroom accuracy often believe that their performance in this area is satisfactory. But stockrooms
that aren’t measured and don’t perform cycle counting rarely have record accuracy levels above 50%.

Your current status can be determined quite easily by selecting a representative cross-section of sample items, counting them, and
comparing the counts to on-hand records, being careful to properly sequence inventory counts and transactions. The results will
determine the amount of work that needs to be done to achieve 95% accuracy, the level considered adequate for a basic MRP system.

Setting Goals for Improvement


Although the desired accuracy level is 95% (by part number and by location), if your initial sample results fall far below this figure it
may be a good idea to set interim goals for improvement. These will provide momentum and job satisfaction for participants in the
improvement process.

As your company begins to use more sophisticated methods of operation, such as Kanban and Just-in-Time (JIT), 95% record
accuracy may not be good enough. These methods contemplate a bare minimum of inventory and much higher turnover ratios, so it’s
much more important to know exactly how much you have and where it is located in the stockroom.

Maintaining Record Accuracy: Rewards and Audits


Once you’ve achieved a satisfactory level of record accuracy, how do you maintain it? While continuing cycle-counting routines is
important, there are other steps you can take to maintain the desired level and encourage your personnel to maintain high standards.

Consistent reporting structure. A reporting structure that provides a continuous measure of on-hand balance accuracy daily by zone,
weekly by store, and monthly for the entire plant, is extremely beneficial. Such a reporting structure will also identify strengths and
weaknesses and provide a warning if accuracy declines.

Wage incentive system. If you already have a wage incentive system in place in the stockroom or warehouse, tying record accuracy
levels to the system can be quite effective. If no such system is in place, however, other methods of rewarding performance in this
area may be more effective (see below).

© 2009 Principa. All Rights Reserved. 53


Quantity Control: Just as Important as Quality
Control (Cont’d)

Rewards.
Providing material rewards for the accomplishment of goals can provide an incentive for workers to maintain the accuracy of records.
These rewards may take the form of cash bonuses, lunches or dinners, theater or sports tickets, or other items.

Recognition. In many cases, recognition within the company is a greater motivator than material rewards. Personalized items, such as
coffee mugs, pens, or T-shirts inscribed with the individual achievement, can be used to offer such public commendation.
Announcements in the company newsletter are also highly prized.

Audits.
Periodic audits, conducted at random by an independent agent, are quite effective in maintaining high levels of stockroom accuracy.
Reporting the results of such audits helps make on-hand balances credible to workers outside the stockroom management chain.

The Cost of Record Accuracy


All projects involve some cost, and quantity control is no exception. The good news is that these costs can be more than offset by
savings in other areas, savings that can be measured and substantiated. Costs will most likely be incurred in the following areas:

Personnel. Additional personnel will be required, even after the desired record accuracy level has been attained. It may be necessary
to hire and train cycle counters and, at least initially, to increase the on-roll in the stockroom or warehouse.

Time. The time needed to conduct cycle counts must be taken from hours previously spent storing or picking material. Employee
training also requires time off the job. Some overtime may be required in the early stages of a record purification project.

Computer capacity. If you don’t already have one, you’ll need to purchase an off-the-shelf cycle-counting software package (or
perhaps design custom software); new hardware may be required as well.
The Benefits of Quantity Control
When high levels of inventory record accuracy are achieved and maintained over time, savings are experienced in the following areas:

•Minimized “safety stock” allowances


•Reduced expediting
•More accurate order point triggers (allowing vendors and manufacturing shops adequate lead time to provide needed items on time)
•Quicker identification and elimination of surplus and obsolete inventory
•Higher percentage of successful picks, resulting in better customer service and more on-time deliveries

In short, quantity control of 95% or better is a key ingredient in a successful MRP system.

© 2009 Principa. All Rights Reserved. 54