Taking charge of taking inventory

In manufacturing, few business activities incite as much dread—revulsion, actually—as taking inventory. An OSHA inspection is near the top of the list, and an accounting audit can’t be far behind, but for companies with large amounts of stocked material, taking inventory takes the cake.

On any given day, its business as usual for most manufacturers. Raw materials show up at the receiving dock, components and assemblies leave via the shipping dock, and the shop floor personnel focus their energy on doing everything in between as well as they can, as quickly as they can. On a day dedicated to counting the inventory, little of that takes place. Taking inventory is a dull and thankless job that gobbles up too many hours, taking too many skilled personnel away from core tasks.

If you could outsource the inventory process and implement a technology to improve its accuracy, would you? If you have inventory by the acre, you just might consider it.

Inventory Madness

If it weren’t required by law, most companies would probably count their inventory only rarely. It’s a big task that saps morale and productivity.

“Some companies rely on a large number of core people to count the inventory,” said Scott Ross, founder of Invictus Inventory. “This brings productivity to a standstill for several days. Other companies use a handful of people to do some prep work a week or so before the inventory count. This helps to keep the productivity from falling too far, but it slows things down for a longer period of time. Others encourage their people to work faster to get orders out the door immediately before and immediately after the inventory count. That’s three ways to address it, but in every case, you have a situation that you don’t want—lower productivity and lower morale.”

In some industries, taking a regularly scheduled inventory doesn’t solve the problems its intended to solve anyway.

“Each industry does things in a different way,” Ross said. Some count items, some go by weight, some count the linear feet, he said. This doesn’t mean that one is better than another; it’s just a matter of using a method that makes sense for the industry. Tube and pipe are measured by linear foot, but that’s not the end of it.

“A big problem with tube and pipe is how many companies count it,” Ross said. “For a particular type and size or product, often they combine all of the lengths into one inventory record. If the record shows 1,000 feet of a particular grade and size, and the customer needs 1,000 feet of it, the sales department takes the order. The operations department doesn’t know what lengths are in the various storage locations, so they waste a lot of time running around the yard to fill the order. Then, as they try to fill the order, they come to the realization that they can’t do it because the lengths on the pick sheet don’t match the lengths they have in stock. To make up for the shortfall, the purchasing department has to place another order for more pipe, and of course the company has to pay a premium to expedite it.”

According to Ross, you can trade all that for an inventory count that is less disruptive, less expensive, and 100 percent accurate.

Outsourcing the Inventory Count

Ross developed a strategy for inventory control and founded a company—Invictus Inventory—to deploy this strategy. He doesn’t claim to be able to solve every inventory issue, but he is confident that his company can relieve a lot of stress and headaches. The company uses a four-step process based on a few things Ross learned earlier in his career, when he worked as the subject matter expert in one of Amazon’s largest inbound operations.

The first step is an orientation. Because every company and every inventory is unique, the Invictus team needs a few days to learn what each prospective client does and how the client does it. The orientation gets Ross and the Invictus staff up to speed on the inventory layout, the variety of materials in the inventory, and operational work flow. They also look at the employee hours worked during the business-as-usual time of the year and make a comparison to the hours worked during a typical inventory cycle. Ross uses all of this information to estimate how many hours a complete inventory count will require.

The second phase involves radio-frequency identification (RFID) tags. A secure, weather-proof RFID tag is placed at every inventory location.

The third phase is when things get interesting. Invictus sends out two teams, using different RFID technologies, to count the entire inventory. Rather than lumping all like items into a single inventory record, the team tallies every unit by length, wall thickness, and heat number.

“Our goal is to provide a complete inventory record down to the last inch of product,” he said.

After the entire inventory has been counted and the information has been flashed to the RFID tags, Invictus needs to move all of that information into a database. To do that, it uses an autonomous vehicle that roams the warehouse or the yard, passing every inventory location, reading the tags, and accumulates the data.

Why two teams using two technologies? It’s a cross check. The goal is 100 percent accuracy, and this is how the company pursues that goal. In cases in which the two counts differ, they can go to that inventory location and recount the contents.

Finally, because a company’s inventory is proprietary information, Invictus delivers the data to the client securely. No company wants its data breached or released, so Ross delivers the information in person.

Wary of a Wayward Warehouse

Ross doesn’t claim to use any hocus-pocus in his company’s efforts to arrive at an inventory count that is 100 percent accurate. It’s a transparent process, sharing inventory count data with clients while the count is in progress and providing daily updates until the count is finished. In his words, its results are based on diligence and patience: Diligence in asking the right questions and learning how the company works, and patience in the repetitious task of measuring pipe after pipe, minute after minute, hour after hour, day after day.

That said, the company does use a proprietary algorithm that helps it estimate how many hours the team will need to do the work, which allows generation of an accurate bid for its services.

Who came up with the algorithm? That was Ross, and this wasn’t the first time he devised a program for inventory management. During his time at Amazon, he led a team in charge of inventory consolidation and came up with a process that eliminated the actions that wasted a lot of inventory space in the first place.

“I worked in a warehouse that had three inventory bin sizes,” he said. “Ideally, the bin sizes would correspond to the bin contents—big items in big bins, medium-sized items in medium-sized bins, and small items in small bins. This would be the most efficient use of space,” he said. However, the warehouse workers had no way of knowing where to find the closest bin of the appropriate size, so the warehouse space usage was far from efficient. Ross's consolidation effort was an unending mission to search for wasted space, moving inventory from one location to another to optimize warehouse capacity.

Getting the inventory into the best bin location would resolve this issue, but it was not a simple chore. Still, Ross came up with an effective solution.

“The company had two software systems, but they didn't talk to each other,” Ross said. He figured there had to be a better way. He came up with an algorithm that compared the dimensions of the incoming inventory item to the dimensions of each bin location, then searched for the closest empty bin that met the size requirement. He brought efficiency to the company’s warehouses, saving it about $700 million per year, he said.

Invictus can’t save your company millions of dollars per year, but if yours is inventory-intensive, Ross is confident that his company’s process is less expensive, less disruptive, and more accurate than doing it yourself.

Invictus Inventory, 7813 S. Jasper Way, Englewood, CO 80112, 720-295-1113, service@invictusinventory.com,www.invictusinventory.com