Tag: record accuracy

Guest Post: Continuous Process Improvement Tools

We welcome  this Guest Post from  Kevin Watson, Asst. Prof. in the Dept. of Supply Chain and Info. Systems, at Iowa State U.

OM students are frequently reminded that data accuracy is a prerequisite to effective inventory management and operation of MRP systems- in fact Barry just blogged about this on November 4th. As professors, we often discuss the application of lean and quality improvement techniques; however, discussion tends to focus on manufacturing processes and students frequently miss that continuous improvement techniques can be applied to non-manufacturing activities. An article I just read, “Continuous Improvement Approach Reduces Errors in Records” , provides an example of continuous process improvement tools utilized to address paperwork errors.

The article discusses a holistic solution to address record errors in shop floor packets traveling with medical devices during manufacturing. MEDRAD, a 2003 Malcolm Baldrige National Quality Award recipient, experienced error rates as high as 20% in the paperwork necessary to track products through manufacturing ,resulting in compliance issues and causing unnecessary rework and delays. The company addressed this issue through the use of a quality improvement project utilizing technology, process, and people based solutions. The project resulted in a reduction of record inaccuracy to 2.2%, saving the company $40,000 and accruing significant non-financial benefits.

Addressing non-manufacturing errors while retaining the familiar touchstone of the manufacturing environment, it is an excellent means to expand student understanding of quality management tools applied to non-manufacturing processes and to begin the discussion of their application in the service/administrative environments. The article would be an excellent complement to the Quality Management chapters (Ch6/S6) and could be touched again during a discussion of inventory record accuracy in conjunction with Material Requirements Planning (Ch 14).

Teaching Tip: Teaching Inventory Modeling in the Real World

Our research shows that the most frequently covered topic in OM courses is Inventory Management (Ch.12). In that chapter, we do discuss the importance of record accuracy, cycle counting, and shrinkage. But what we do not discuss is the use of the numerous inventory models if  inventory is only “partially observed”.

In today’s issue of Decision Line (Oct., 2010), an excellent article by Prof. Suresh Sethi, at U.Texas-Dallas, goes into the reasons for partial observation of inventory levels and then discusses how these impact modeling efforts. Here are 5 causes Suresh details:

1. Sales recorded wrong (eg, a clerk scans an item twice, when there were actually 2 different flavors of soup).

2. Misplaced inventory (eg, when items are stored dynamically, not in a fixed location). Suresh tells of a top retailer who discovered 16% of its items were misplaced.

3. Spoilage (eg, when customers tear open a package to look at the item inside, spill drinks on clothes, or scratch a car they test drive).

4. Product quality and yield (eg, when some items coming into the warehouse are unknowingly damaged).

5. Theft (eg, break-ins, employee pilferage, and customer shoplifting). The Limited, eg., recorded an inventory discrepancy of $142 million a few years ago—the equivalence of 21,000 ocean containers!

Suresh concludes, “By now it should be clear that the  incomplete inventory information (i3) problem is quite common in practice, that policies in current use are neither optimal nor applicable”. He finishes the article by discussing 4 ways to classify i3 problems.

The real point worth making in class is that the models we discuss in Ch.12 depend on accurate record keeping, which may be impossible in a variety of real world companies.