UK: Hands off stock control! (2 of 3)

UK: Hands off stock control! (2 of 3) - A year or two ago a brief survey was carried out to obtain a better understanding of the requirements of stock controllers in relation to a new system. They were asked two questions: first, what information do you

Last Updated: 31 Aug 2010

A year or two ago a brief survey was carried out to obtain a better understanding of the requirements of stock controllers in relation to a new system. They were asked two questions: first, what information do you need; and second, how do you use information to reach a decision about what to order or manufacture? Answers to the first question were usually quite precise. Answers to the second were anything but. "Looking at information gives me a feel for the situation," was one fairly typical answer. Yet responses varied widely from one stock controller to the next. Information which one thought essential would be disregarded entirely by another, even though they could be sitting side by side in the same office, handling groups of parts with similar characteristics.

Stock controllers' behaviour in practice usually demonstrates a degree of consistency, however; one which is virtually immune to the influence of computer-calculated recommended order quantities - or manufactured quantities. The calculated order quantity is invariably regarded as a minimum to be "rounded up", and in some instances doubled, "just in case". It is hardly surprising, therefore, that stocks can be as much as halved by denying the controller any discretion to override computer-calculated figures. Inventory control is an area where "common sense" does not necessarily produce the best results.

Top management frequently contrives to create a climate in which the stock controller feels bound to carry on in his traditional way - whatever computer aids might be provided. Senior managers can often be heard laying down that a certain level of stock availability/customer service must be achieved. In the very next breath the same manager will sometimes insist that the stock turn must be so high as to render his first instruction impracticable. Other constraints may then be added (frequency of reordering, minimum size of batch that can be manufactured) which make quite sure that the inventory controller has no chance whatever of meeting his objectives.

Operating managers, especially those in multinational companies with head offices far removed from the front line, have evolved a fascinating range of subterfuges so as to be seen to be meeting their inventory objectives. In one large European group the stock turn is calculated on the basis of an annual stocktake. Up at the sharp end the goods-inward section of the warehouse stops work some days before the conclusion of the financial year, and no more deliveries are accepted. The queue of trucks waiting to unload grows steadily until midnight on the last day of the year. Then the barriers are lifted and normal business resumes.

Another company has been observed to report substantial write-offs of "dead stock" in each of three successive years. Whether this has done anything for the firm is not clear: it must surely have improved the profits of the scrap metal merchants.

Of course, inventory reductions have always been popular among accountants faced with cash flow problems. The stock controller is given a directive to reduce inventories by, say, 10%. The instruction naturally makes customers unhappy, since they no longer receive the service which they expect. It also causes disruption to production schedules through lack of materials. Once the crisis is over, and attention is directed elsewhere, stocks invariably creep back to their former levels - until the next time.

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