INTRODUCTION

Despite great advances in manufacturing technology and management science, thousands of

organizations still don't have a handle on basic inventory record accuracy. Many companies don't
even measure it properly, or at all, and lack corrective action programs to improve it. This paper offers
an approach that has proven successful a number of times, when companies were quite serious
about making improvements. Not only can it be accomplished, but it can likely be done within 60 days
per area, if properly managed. The hardest part is selling people on the need to improve and then
keeping them motivated.
The net cost of such a program? Very likely free, when one considers the benefits gained, which
usually far exceed the costs. Inventory accuracy benefits help: provide excellent customer service,
determine purchasing and manufacturing priorities, reduce operating costs, and provide accurate data
for financial records.
The author also addresses the gap in contemporary literature in the area of accuracy program
features for repetitive, JIT, cellular, process and project-oriented environments.
Do you have inventory accuracy problems? Typical symptoms:
Lots of inventory errors
Surprise backorders, unplanned shortages, "lost material"
Nobody believes the recordsnumerous calls to "check" on availability
Air freight bill exceeds the national debt
Nasty financial reporting "surprises"
Lack of consensus on importance of accuracy
Lack of consensus on how to measure it
Inability to reconcile inventories, cycle counts
Error causes largely unknown
Weak/no company tradition of data accuracy
New systems/software implementation causing more confusion
Solution recommendations are presented as follows...
ORGANIZE PROJECT
Results are usually best when there is a bit of a crisis atmosphere established. Business as usual
won't usually serve to get serious inventory accuracy problems fixed within two months. Sometimes a
humbling blow, such as losing millions in an inventory "write-down", or an unfavorable "write-up" by
a customer, is helpful to shatter the status quo and energize an organization to begin work in earnest
on a solution. Top level executive action works best to motivate and mobilize people. At a minimum,
perception of a costly problem is needed, with some realization of a need to correct it.
Try to tie company goals and objectives to project objectives, to help ensure that people "buy-in" to
the project and will be measured and rewarded on the results.

Once the initial goals are attained, don't just declare victory and go home. Set up a lower key ongoing
maintenance effort to ensure that the problem stays fixed and that further improvements are made.
An Executive Sponsor is needed, someone with the clout to keep resources and attention focused
on the problem until completion. Results are usually directly proportional to the strength and
commitment of the executive sponsor. Sometimes it's not possible to get a sponsor until a case is
made that there's a problem.
A Project Leader and Multi-Disciplinary Team is required, preferably from Operations, Materials,
Finance, Distribution and possibly, Process and Design Engineering (depending upon the problems
identified). In a large organization, a full time project leader may be needed. People will be needed for
inventory verification, cycle counting and reconciliation. The amount of manpower needed is
dependent upon organization size, complexity and magnitude of the problem. For example, one
500,000 sq. ft. process plant with about 4000 items and 30+% inventory accuracy needed a full time
coordinator, four full time cycle counters and two part timers for six months, tapering off after that.
Often, consultants and corporate auditors participate to make projects more successful.
A Project Plan is needed, incorporating recommendations from this paper and other companyspecific activities. This plan, along with a running list of accuracy related issues and actions, should
be used to drive the project and focus efforts on activities needed to attain accuracy goals. Issues
should be identified, put on a master issues list, assigned to appropriate personnel to solve, then
discussed and tracked at every weekly meeting for the duration of the initial improvement project.
The plan should contain specific activities, responsibilities and dates. It needs to be followed and
managed competently. Unless carefully managed, a substantial amount of project time will be spent
trying to figure out what the problems are, and getting resources assigned to them.
Regular Review Sessions
Initially weekly, these sessions will help the team to stay focused. It's strongly advisable to have the
sponsor there at least every other meeting. Missing participants should send bonafide, participating,
decision-making delegates if they cannot themselves attend. The standard agenda is the project plan
and the issues list, which should be updated and distributed well before each meeting. Copies should
go to key executive and management people, who should ask probing questions, offer help and show
some interest in the project. The effect of management "mindshare" on the results of such projects
cannot be over-emphasized.
Education
An inventory accuracy seminar/workshop, delivered early in the project life cycle to the project team
and key operating/administrative personnel, will improve help quality and schedule performance, often
dramatically. The workshop should cover accuracy criteria, needs, inventory system approaches,
needed changes, cycle counting and physical inventories.
It should focus less on how to cycle count than how to set up a good inventory system to avoid
problems in the first place. As a result, with some coaching, the team will be able to set accuracy

criteria, install diagnostics, design system improvements, write and make procedure improvements
and institute performance measurements.
There needs to be ongoing instruction on inventory/material control principles, techniques and specific
company policies and procedures.
Publicize Program and Performance
Get the word out. The program goals, objectives, general approach and performance need to be
communicated orally and in writing to company staff, most employees, and even suppliers and
customers, if they are involved in the effort. Large posters can be displayed around the facilities to
communicate project goals and current status. Orientation meetings can be conducted and
employees educated in problem areas and procedures to help remedy them. Contests and other
events can be used to raise awareness of problems and goals, and even to make it fun. Successes
should be celebrated, failures used as lessons learned and applied.
Choose Your Battles
Realize that there are limited resources available, and that these cost money, so prioritize by tackling
issues offering the best payback and those that can be won.
Actual examples:
For one company, it was very hard to keep track of color concentrates, since they were ladled out of
barrels, were kept out on the floor, and didn't cost all that much anyway. So, these and other similar
items were placed on "two bin" order control and expensed, eliminating a whole class of inventory
record problems with little more than a stroke of a pen.
Another firm had three storerooms. The first one contained fabrics for airline seats and was very well
organized and well run, so minimal effort was expended to improve it. The second one was a poorly
controlled raw material storeroom with a short-timer supervisor about to retire. Material lead times
were only a few days, so the effect of errors was less serious. We elected to wait out his retirement,
which was only a couple of months away. The third storeroom contained purchased parts and
specialty fabrications. Lead times were long, costs were high and the consequences of errors were
serious, so we elected to initially focus on this area. To narrow scope even further, we initially
concentrated only on items needed within the lead time horizon and ignored obsolete and excess
materials.
The VP, Finance in still another manufacturing company agreed to waive physical inventories for
areas demonstrating that accuracy goals were being met, freeing up resources for more productive
purposes.
In general, controlled storerooms are the easiest to improve, since they are often physically
restricted areas, have supervision more oriented to accuracy concepts, transactions less subject to
process-related errors and they can be more easily counted. Then attack work-in-process areas,
which are generally more challenging.

 One team uncovered dozens of accuracy issues. These were prioritized so that problem-solving
resources could be focused on the best payback items with the greatest chances of resolution.
A few companies we worked with have gotten almost immediate payback by conducting location
audits. Simply check each location and compare it to your records. Physical locations not in the
records may be exciting windfalls. The opposite case is cause for a corrective cycle count adjustment.
This approach requires far less resources than a physical count inventory.
Most companies observed weren't able to reconcile all errors, especially in the beginning. They were
advised not to even try. It's like attempting to bail out the ocean, because errors were being made
faster than inventory balances could be corrected, let alone diagnosed and reconciled. So, they
focused on eliminating the principal CAUSES of errors initially. Every time a cause is identified and
corrected, it may likely eliminate dozens, hundreds or even thousands of future potential errors. This
concept may be difficult to sell to some accounting personnel, who have been conditioned to balance
every debit and credit to the penny. Choose your battles!
DEFINE INVENTORY ACCURACY
Why
This sounds simple enough, but experience has often proven otherwise. Before convincing people to
fix inventory problems, they must first believe that there are problems and a need to fix them. Before
establishing the existence of a problem, it helps to have standards to measure performance against.
What It Isn't
We have often been told by representatives of various companies that their inventory accuracy was
high, even "world class," 95, 98 or even 99+%, when in fact, there were surprise backorders,
unplanned material shortages and unexplained excess inventories. When asked about inventory
accuracy, shop floor and stores personnel would just smile and tell us their inventory horror stories.
So why does this happen? There are different ways of measuring it. For example:
One firm thought their inventory records were outstanding because they were accurate within
$20,000 for a $6MM inventory, or 99.7% accurate, they boasted. Well, it turned out that this was
merely an arithmetic sum of the financial errors and that the absolute value of the individual errors
was actually $900,000. Even this sounded like 85% accuracy.
But, operations people know that products are built with specific components and that customers are
shipped specific products or services, not dollars. When other factors like posting cut-offs, location
errors and part number errors were considered, it was calculated that accuracy was actually only
66%!
Inventory accuracy is the probability of finding the right items in the right location and quantity that the
books say are there. 66% accuracy means that 34% of items surveyed had quantities, locations or
part numbers significantly differing from "book" records. Looking at it another way, for a ten item

order, there would be only a 15% probability of finding all parts corresponding to what the books said
was there. Is that any way to run a business? By the way, it's sad to say that 66% is about average.
Another reason for the accuracy credibility gap is that people delude themselves, occasionally even
lie. The author once had to fire someone who was falsifying counts. The sad news came out of a
routine audit designed to check the effectiveness of the cycle counting system. More often, people
just rationalize that things are much better than they really are. Example:
At one company, a survey taken showed 47% inventory accuracy, only a month after the annual
physical inventory. The Inventory Manager, after challenging the methodology, integrity and ancestry
of the auditors, claimed that it should be adjusted to 73%, because not all of the unposted
transactions, some more than a month old, had been factored in. Hmmm.
What It Is
95% accuracy is said to be the minimum acceptable level to run a formal system. Our experience is
that 95% is a lot better than the average company, but it's nowhere near what is required to run a
world class operation, where 98 or 99+% is more appropriate. Going from 66% to 90% is easier than
going from 90 to 95%, which is easier than going from 95 to 97%. When a company sets a goal of 95,
98 or 99+% inventory accuracy, what should that mean? We usually recommend the following
accuracy criteria, subject to company special requirements:
Quantity of book to reconciled physical inventory to be accurate, for example, within 1% for "A"
items, 3% for "B" items and 5% for "C" items. These targets should reflect relative value of the
material and the limits of counting process capabilities. Most firms compare physical to reconciled
book quantity error vs. book quantity to measure accuracy, for convenience of computations.
Sometimes we recommend comparing the calculated error to the weekly or monthly usage quantity,
because it's statistically more valid, especially in a high-volume, low inventory environment.
Item identification must be correct, or it counts for two errors, since if it isn't what the records stated it
was, then it must be something else. Unless inventory people are very thorough and knowledgeable
about item identities, these errors often go unrecognized until detected by an inspector, production
operator, or even a customer. We recommend item verification before storage or movement to the
next process station. It is helpful to post item specifications and photos and train employees in their
use to reduce such errors.
Item must be physically in the exact "book" location or it is considered an error. If you can't find it,
that's even worse than not having it at all, because it cost money and it's taking up valuable space.
Make sure you define item locations neither too detailed nor too general. If too detailed, it will be
burdensome to maintain the records and control material.
Timeliness of records - Must be posted by some deadline, such as immediately when moved, within
an hour, or by the end of the shift when transaction was physically executed. This greatly improves
the timeliness of information and improves "cut-off" control for reports and reconciliations.

 Accuracy percentage = (number of items sampled meeting above criteria/all items sampled) x 100.
We sometimes convert performance measures to error parts per million (PPM), to make
measurements more compatible with companies' quality systems.
MEASURE ACTUAL PERFORMANCE
Why It's Difficult
This too, is more difficult than it sounds. Many companies are simply unable to reconcile book to
physical inventory because they:
Have multiple, incompatible inventory systems.
Can't master the timing "cutoffs" for count reconciliation.
Poorly define and enforce material and transaction flow procedures and policies.
Don't have people assigned to and/or schooled in inventory records reconciliation.
Initial Survey
You'll need an initial survey to assess the level of accuracy. This is recommended, even if there is an
ongoing system in place, to help verify how well it is working. To assess the level of inventory
accuracy, pick a representative and statistically valid sample of items, crossing different product lines,
processes and areas. Consult an expert in QC or SPC (Statistical Process Control) if not sure how to
do this.
Make sure you have agreement on what is to be measured and how. Get agreement on the
measurement criteria (see section II, above). If there is more than one inventory system, agree on
which one(s) you will be reconciling to. Be aware of how these systems are updated and enlist the
cooperation of those involved in their operation and maintenance.
Better results will be obtained if all transactions are posted before counting, especially if the inventory
system is in poor working order. This helps eliminate a very common source of errors, "cut-off" timing.
In particular, watch out for items in staging areas, QC, Shipping, Scrap, Bond, etc. It's best to do the
survey while operations are shut down, since it further reduces the chance of transaction cut-off
problems.
For improved objectivity, it is recommended that people who are removed from "ownership" of the
current system be used to audit or even supervise this survey. Bias may be inadvertently or
intentionally introduced otherwise.
The survey should be used to help establish "baseline" accuracy by area- for instance- "Store Room
#1, "Shipping Area", QC Hold #3", "Disk Assembly," and "Total." Publish the results after careful
verification, then discuss and act on them. The initial survey often helps to establish the dialogue that
propels successful projects. It is possible that some diagnostic work can be done during the survey,
but in general, we have found that diagnostics are problematic at best for a poor inventory system
without baseline figures, good procedures in place and regular cycle counts.

Wall-to-wall physical inventory

For some reason, many people love these and think that they provide "better control. " Although better
numbers can often be obtained in this manner in companies with poor inventory systems, complete
inventories are often disruptive, very expensive, time-consuming, introduce errors of their own and do
little to correct the underlying problems contributing to inaccuracy. They are often done in a state of
near-anarchy, with inadequate training, policies and procedures, using unmotivated people who don't
want to be there.
However, the majority of manufacturing companies still take a periodic wall-to-wall inventory, often
annually, usually to reconcile the books for financial statements. Unfortunately, these are not
necessarily beneficial to organizations needing accurate operational perpetual inventory numbers to
do business with.
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Improve how physicals are done, since they may in themselves be a significant source of error, as
well as expensive and time-consuming. Procedures might need to be reviewed and upgraded, along
with training. The cutoff, reconciliation and posting approaches employed are common sources of
errors.
FIX THE SYSTEM
Institute Improved Policies and Procedures
Procedures are often in need of a major overhaul. Many are poorly documented, unworkable or
cumbersome. The project diagnostics, team meetings, cycle count results, conference room pilot and
employee suggestions can all funnel information to the people who revise procedures.
Identify every single transaction and procedure potentially affecting inventory accuracy. Review and, if
necessary, enhance, simplify and document them, then thoroughly train all applicable personnel in
their use. Keep simple concise procedures available for employees' ready access. Have employees
practice/drill in procedure use. An inventory system test or "demo" database is a good tool to practice
with.

 New procedures/changes should be reviewed with users in advance, thoroughly tested and
documented prior to implementation.
Procedures should cover all aspects of inventory transactions: receiving, inspection, stores, issues
to floor stock, production, substitutions, transfers, scrap, rework, return to vendor, completions to
stock, shipments.
Set Up Basic Inventory Movement Structure and Controls
Most companies lack a common understanding on how inventory transactions- material and
paperwork - should flow. One of the first evident symptoms of this is an almost total inability to
reconcile cycle counts of active items, due to transaction "cut-off" problems attributable to
unpublished/unenforced transaction document flow times. Forget about a full cycle counting program
until this is corrected. First, establish, implement and enforce:
Inventory "transaction flow map" showing all work centers/cells/stores areas, material and paper
flows, transaction types and account numbers, so that people will know what should happen. When
people see a graphical depiction of system flow and have it explained to them, it often helps them to
decode the mysteries of a system.
Flow times - How long it should take to receive a part, move it to stores, issue it, move it between
operations. Publish these flow times, post them, and get people accustomed to working with them.
Highlight transactions missing flow time targets.
Cutoff times - How long it should take to post a transaction after it physically occurred. Publish and
highlight similar to the above item.
Drop points - Where material and transaction documents should be placed. Mark these areas
plainly to reduce confusion. Painted lines on the floor, signs, sometimes even fences, may be needed
to get the point across.
Logging and batch controls, especially for key "gateway" transactions such as receiving and
shipping. Comparing daily posted transactions to the logs often helps detect missing or erroneous
data. Logs can also be useful in reconstructing "crashed" systems.
Write Cycle Counting Procedure
Cycle counting should be the principal ongoing performance measurement, diagnostic and problemsolving approach, basically "SPC for inventory control." It is a procedure to help determine if the other
inventory procedures are working. The procedure needs to fully reflect the overall systems flow and
timing. For instance, if inventories are updated daily by MIS, it may be necessary to adjust for
unposted transactions prior to completing reconciliation.
In a high-volume repetitive production in a backflush environment, It is necessary to log production
occurring between backflushes and to know precisely when these were performed. In addition,
knowing the whereabouts of discrepant material routed for inspection and alternate processing, but
still unposted, is vital, since counts of material in the area may omit it.

Consignment inventory rules sometimes need revision to facilitate cycle count reconciliation as well.
Run a Control Group
Once the program is underway, team members often want to quickly start an ambitious, large scale
program of cycle counting. Some people come running out of cycle counting seminars, flushed with
enthusiasm, wanting to use their new tools immediately to vanquish the demons of inventory error. In
general, don't. Why? Because in most cases the infrastructure isn't yet in place to support an effective
cycle counting system. Make sure it is in place BEFORE starting regular cycle counting, or you're in
for some big disappointments and loss of credibility.
In the meantime, use the initial survey population as a "control group" to help regularly and frequently
assess the propagation of errors. Count and reconcile these items over and over again until you start
to get the hang of what's wrong. Chances are, this will be a very tough chore initially, because of the
many things wrong with the system. Don't be surprised if you can't identify many item error causes
with certainty in the initial period. As you count them more frequently, there will be shorter intervals
between counts, increasing the likelihood that error causes can be isolated. As the basic controls
identified above are established, they will eliminate many errors and make it simpler to identify those
that remain. Make sure that problems are posted to the issues list, prioritized, assigned for resolution,
discussed at meetings, completed, documented and resolved.
At some point, when the team feels that they have basic controls in place and have mastered control
group diagnostics, they can turn the cycle counts loose on a larger scale.
Remind your people that control group accuracy levels are about as representative of all items as
MENSA members and basketball players are of the general human population. By definition, the
control group is skewed, because it receives inordinate attention and care as a diagnostic tool. We've
actually seen companies boast about the control group accuracy as representative of all items,
declare victory, then go home smiling. The control group only indicates the level of propagation of
errors, and if you work at it, their cause. Even that could be wrong, since employees quickly discover
which items are measured in the control group and pay special attention to them. Rotate items
occasionally.
When the control group is running in the mid 90% accuracy range, it's time to turn on large scale cycle
counting. Companies trying to turn it on too early may get swamped by massive numbers of
irreconcilable errors. Some even compound the errors when they start posting corrections before
they've got reconciliation/posting procedures working satisfactorily.
Most error causes can be found and resolved during the initial control group period.
Make Physical Changes
Paint lines on floors to indicate drop points and department boundaries. Record tare weights on all
containers used in weigh counting. Use bar code or other accurate, efficient data acquisition methods.
Deploy counting scales where appropriate. Isolate obsolete inventory for final dispositioning. Assign
designated drop points for discrepant or "hold" status material. Ensure that there is adequate and

appropriate material handling and storage equipment. Sometimes something as simple as lines on
the floor, a fence or a gate can make a significant difference. Consider a move to a process-related
flow, which may greatly simplify material/inventory control.
A comprehensive facility location system is essential for success in locating material quickly and
efficiently when it is needed All inbound and in-transit material should be directed to locations, or they
should be assigned upon arrival. If the location system is simple enough, materials might be
automatically routed. Reduce the number of possibilities to make mistakes. The location codes should
be plainly marked all around the facility, so that there is no confusion about the location. Isolate/purge
excessive, obsolete and damaged inventory.
Make Information Systems Improvements
Sometimes computer, software and MIS operational problems contribute to inventory problems.
System users tend to overstate these, although we have seen them over and over.
Make sure to set up system tables/data fields properly, or they will generate erroneous transaction
data. For example, if bill of material codes weren't set right, then certain inventory transactions
wouldn't process. Once the system is set up wrong, these errors may take months to detect and
diagnose. These can't simply be changed with impunity, but require careful prior testing and well
coordinated changes, usually with the assistance of MIS and/or software suppliers.
Computer batch update processes are sometimes set up improperly or fail to execute as planned,
creating erroneous or untimely postings. This is especially critical to three shift operations, where
mission critical systems can't be down long and botched batch updates can significantly impede
company operations. Ensure that they're set up, tested and properly operated. Ensure that there are
recovery procedures in place in case things don't always work properly.
At one company, there were several major bugs not detected in the early conference room pilot,
which was done before enhancements were made to the software. The system pilot testing was not
very rigorous compared to the one the team did during the inventory accuracy project, when every
single process and option was simulated on line, with an exhaustive review and rewrite of procedures
done concurrently, followed by employee retraining. Examples of problems found and corrected:
scrap transactions costing improperly, move tickets failing to print properly, improper costing with
alternate routings, system parameters set up incorrectly causing backflushes to not calculate
correctly.
Ensure that software documentation is made site-specific, so that sufficient simple, clear instructions
applying to local conditions are made available to personnel, who should be thoroughly trained in
these procedures.
Don't Forget Accounting Systems
Even if a system is "integrated," there may still be a few things that it does differently to accounting
than to operations, such as scrap transaction costing, adjustments, etc. In addition, Accounting might
have developed some "hand journal vouchering" procedures that circumvent the purpose of the

system. Run tests to ensure that operations and accounting reports balance and that all transaction
types process correctly and all transactions are accounted for.
Sometimes, system reports are too cumbersome to be helpful to the reconciliation effort. For
example, in one company, Finance received a huge 16 inch thick report every month that didn't
balance and didn't lend itself well to analysis. They worked to get better inventory cost subledger/account data, better suited to check against other cost and operations data and reconciled in
more frequent intervals.
System set-up concerns cited above are equally applicable to Accounting.
Conduct Control Studies
Many industries, like wire manufacturing, for example, have complex wrinkles. For example, the way
wire strands are twisted and compacted, wire customer requirements and the shape of wire drawing
dies, can all have a significant effect on material consumption and inventory. Even when these are
brought under control, the way transactions are reported can also affect accuracy.
To test the system out on a real life basis, conduct a limited number of highly structured "control
studies," count and double check everything issued, everything consumed, all scrap, rework, and
compare that to what the computer transactions/database thought was happening. It may be
discovered that some bill of material, process, tolerance and transaction problems, need correction.
Product lines with unacceptable process capability and tolerancing issues may be identified and
targeted for correction, usually by a separate project.
Other Useful Things
Conduct frequent walking tours through the facility with the project team, local officials and
employees. Listen to what they say and look for obvious problems. Make assignments or take action
on the spot. A picture is worth a thousand words, and the real thing is worth a thousand pictures.
Focus on housekeeping. A sloppy, crowded, disorganized area is a warning that there are deficient
attitudes, procedures or that facilities and equipment aren't up to the job. These things don't always
stand out in reports. There's no substitute for being on the spot. Attack housekeeping problems head
on. Consolidate material, improve marking and labeling, have a proper place for everything, work on
rescheduling/re-routing materials to alleviate congestion. If housekeeping can't be resolved by
checklists and new emphasis on orderliness, then go deeper down into the root causes and start
solving the underlying problems.
PROCESS-RELATED DIFFERENCES
Most inventory accuracy literature uses conventional discrete manufacturing as a model. Repetitive,
JIT, cellular flows, process and project-oriented models all introduce some special requirements. This
section provides a brief overview of these.
Repetitive, JIT, Process-Oriented Flows

Repetitive process inventory control needs some different approaches. It's about 80% the same as
discrete, but that other 20% is extremely important. Much of the product moves so fast that it's hard to
even verify. To summarize some key differences:
Yields require much more attention, especially where process capability is an issue.
Because of high volume and more continuous flow, small errors, even one or two percent, quickly
add up to massive variances.
"Backflush" automated component relief needs to be watched closely, due to the above two items
and also if there are component substitutions, bill-of-material errors, or discrepant material moves. In
some cases, it may be advisable to go to discrete, counted material issues, then reconcile yield upon
completion.
A process flow or cellular layout/management approach makes it much easier to control inventory
than for a functional or job shop scheme. Many companies realize this and are gradually shifting to a
cellular paradigm for this and other reasons.
In a process with many activities, don't try to count and reconcile every activity. Instead, reconcile
various "pay point" or milestone activities, or even logical stocking points. If there are persistent
discrepancies, consider extending controls into the upstream activities of most likely error sources
until the causes are found and corrected.
Trends in repetitive manufacturing indicate a move towards point of use delivery and storage,
supplier-managed inventories (including consignments), backflush and work-orderless/paperless
activity control, including "rate-based schedules." Some companies periodically close and reconcile
rate-based master orders, to help determine performance.
Some process plants are actually continuous process operations. Inventory control may be
accomplished with check points, such as periodic meter readings, or with production rate monitoring.
Material consumption may be checked against product characteristics such as specific gravity,
density, durometer, coating thickness, etc. If one parameter is off, it can significantly affect other key
parameters or resource consumption.
Cells and dedicated lines generally have process-oriented flows and focus on families of similar
items. Such facilities are inherently easier to control. Often, cells are largely self-managing, so
employees will handle their own inventory control.
Simplified control techniques, such as visual methods (Kanban, calibrated containers, two-bin),
average inventory estimates, gateway/paypoint, and zero inventory make to order-only are becoming
more common.
Project Oriented Industries
Make to order businesses often plan and control activities by job, project, order, or even lower level
"work packages." It is commonplace to track inventory and costs by one or more of those entities.

Such work is more likely to be engineered to order as well. In addition, customers sometimes have
ownership/control over inventories and even designs and specifications.
Project/job, work package, configuration, lot and serial number control are often additional tracking
requirements. This makes inventory accuracy more difficult, because these may be included in
inventory control, cycle counting and reconciliation.
Inventory costing may get more complex as well, since actual or average costs are often maintained
and the same item may have different costs for different projects/work packages, etc.
It often makes sense to cycle count by project in these types of businesses. The ideal time to count
is when maximum benefit will be gained, which is just before major decisions affecting cost and
schedule are made, such as planning and procurement, or at the end of a project phase, when
residual inventory must be determined and dispositioned.
Since customers sometimes own all or part of the inventory, accountability standards are sometimes
higher. It's not so easy to "write off" a loss of material. In cases of adjustments for common-use
inventory, who pays is a burning issue.
CONCLUSIONS
As with most major change efforts, inventory accuracy needs strong, continuing management support
to change the culture and practices.
Very little happens in some companies until top management makes poor results unacceptably
uncomfortable to those failing to deliver.
Even after that, things sometimes don't improve until meaningful performance measurements and
improvement mechanisms are implemented.
Strong project leadership is the next most important factor, along with a sound approach and an
implementation plan.
The price of continued inventory accuracy success is eternal vigilance. When programs lose
"mindshare," results often quickly deteriorate.
Inventory accuracy is a permanent state of mind, not a quickie, one-time project. Periodic
backsliding needs constant attention. This is one area where zealots and dictators are needed!
Successful inventory accuracy efforts often have five phases:
1.Realization that there is a problem
2.Agreement on a solution approach
3.Problem-solving phase
4.Records correction
5.Ongoing cycle counting/maintenance
Inventory accuracy doesn't really improve by counting things. It only improves when basic systems,
procedures and training improve.

 Identifying issues and resolving them so that they never occur again is the key to achieving accuracy
goals.
Leadership and peoples' attitudes are the two most important factors for success.
There are some significant differences in attaining inventory accuracy in non-discrete, process,
repetitive, cellular and project-oriented enterprises.
Learn them well and adapt to their needs. Realize also that most companies are a mix of different
environments, so mix approaches if warranted.