Instituted Total Quality Management (TQM), Statistical Process Control (SPC), and Benchmarking techniques

1. 1997 International Conference Proceedings 297
H-8
One Stockroom’s Formula for Success: Doing More with Less, Smart
Stockroom Management = Just Great Service
David O. Campbell Jr.
As manufacturers compete for a larger share of a shrinking mar-
ket, cries for a better way of doing business can be heard re-
sounding throughout the business community. Many compa-
nies are now looking toward “working smarter, doing more with
less, and supplying superior service.” One area in which these
principles can be applied successfully is Stockroom Management.
The implementation of these three principles can result in both
positive and cost-effective changes.
The objective of this presentation is to demonstrate how one
stockroom met the challenge of positive change. It will go
through the characteristics found in the AIL stockroom prior to
the implementation of MRP II and the utilization of Statistical
Process Control (SPC) and will outline the steps taken in the
preparation of the stockroom and stockroom personnel for the
use of these tools. It will demonstrate those characteristics of the
same stockroom after MRP II and the continued successful use
of SPC. The dramatic results accomplished and the efficiencies
gained by the use of these tools will be presented in Figure 1. In
addition, I will show how our Cycle Inventory program ensures
our efficiencies are working.
This is a case study of how a Material Control Organization
was able to meet the call for change and, in the process, upgrade
accuracy, reduce cycle time, and enhance its commitment of
“Great Service” to both internal and external customers.
CHARACTERISTICS OF STOCKROOM BEFORE
MRP II AND SPC
If you had entered our stockroom in January 1989, you would
have found it to be typical of many other stockrooms that do not
have the disciplines necessary to effectively support an MRP II
system. Here are the types of things you would have observed:
• Material was stored in part number sequence without a
bin location system.
• Material was segregated by project, not commingled in
storage locations.
• Material was stored in bins using a bin envelope. Material
too massive or too large in quantity to fit in the envelope was
placed in a bulk location. A bin envelope was left in the bin loca-
tion with a notation as to where the parts were actually stored.
• Incoming material was not prepackaged to meet our needs.
• Counting scales were inadequate to accomplish the re-
quired tasks.
• There was no bar coding of material.
• All pulled kits were 100 percent rechecked by a Verifica-
tion Section.
• We had no formal cycle counting procedures or policies.
All inventories were done on an exception basis.
• The majority of the stock clerks were not knowledgeable
of the inventory system nor in the use of computers.
• All kit back orders were maintained on a personal com-
puter by the Stockroom.
• Providing needed material through our window service
(unplanned withdrawals) took 3 to 4 hours.
• Our kit pull cycle was 30 work days.
Does this sound a little like your stockroom? You can quickly
see we were a pretty “efficient” and “impressive” stockroom.
Then the company decided we needed an MRP II system.
PREPARATION OF STOCKROOM AND THE
RESULTS OF USING MRP II AND SPC
In early 1989, we started to review the capabilities of the new
MRP II system, and we quickly realized the system offered us
several benefits:
• A better way of storing material on our shelves
• Better controls in locating material
• Efficiencies in the pulling of material.
I don’t know what else we could have asked for. There was
only one drawback to this system. In order to reap the benefits,
we had to make some major changes—and we know how re-
ceptive we all are to change.
Our first introduction to change was in the way we had been
storing and locating material for the past 15 years.As previously
mentioned, material was stocked in part number sequence. The
only location assignment being done was in our bulk areas. It
didn’t take us long to understand that this would be a problem,
since the MRP II system generated kits in location order.
We decided to approach our Industrial Engineering depart-
ment for help. A meeting was held, and we outlined some crite-
ria that we thought the system should meet:
• The location assignment should have the flexibility of add-
ing or removing locations.
• The location system should be easy to follow and use,
possibly like how the Post Office uses a street address to deliver
and pick up mail. In fact, we stressed that it should be so easy
that even my boss could look up a part on the system, walk into
the stockroom, and find it on his first try.
Industrial Engineering agreed to take on the challenge. Over
the next four or five weeks they talked to the Stock Clerks, re-
viewed our floor layout, and examined how the shelving was
setup. The results of Industrial Engineering’s efforts gave us a
very simple but efficient way of assigning sequential numbers
throughout the entire stockroom. In the example below, loca-
tion 01-02-04-33 has been broken down into the elements that
have meaning to our Stock Clerks:
01 - 02 - 04 - 33
FLOOR LEVEL - BAY - COLUMN - BIN
These location numbers have been assigned in a left to right,
top to bottom format that proceeds clockwise through the stock-
room.
The next change we encountered was in the way we stock
parts and documented locations within the stockroom. MRP II
allowed us to enter the physical location of the material being
Figure 1. Results from using MRP II and SPC.
Percentage of
Task Before After Improvement
Kit Pull Cycle 30 days 2 days -93.3%
Pull a kit line 18 minutes 6 minutes -66.7%
Inventory a part 30 minutes 10 minutes -66.7%
Pull a “unplanned issue” 4 hours 3 minutes -98.7%
Inventory accuracy 83% 98.9% +15.9%
Kit pull accuracy 87% 99.6% +12.6%

2. 298 APICS—The Educational Society for Resource Management
stocked. We were no longer dependent on stocking material in
part number sequence or using a bin envelope to tell us where
the material was located. In addition, we would be able to ran-
domly stock and commingle inventory for different projects in
one location. This would enable us to eliminate paper on the
shelves (bin envelope) and to better utilize our shelf and floor
space.
In January 1990 all stockroom personnel started attending
MRP II classes. The instructors were the Stockroom Supervisors,
who were educated by their managers. This ensured that all
education was accomplished from the top down; all personnel
who required the education received it. This education was com-
pleted three months before the conversion of our pilot program
to MRP II.
In March 1990, we converted our first pilot program to the
MRP II system. We were on our way to a new future and a new
way of doing business in the stockroom. The stock clerks were
amazed at how powerful a tool MRP II was in their day-to-day
work. In fact, after a couple of months, all Stock Clerks were
trained to enter inventory transactions and were given the re-
sponsibility of doing so after storing or pulling material. This
enabled us to process inventory transactions in real time.
There were two immediate benefits realized by the stockroom
from just turning on the MRP II system. First, it automatically
tracked all material that was on back order. Second, it eliminated
the pulling of “air” (material not available in stockroom), which
has made the stockroom 65 percent more efficient in pulling kits.
Our kit pull cycle time was reduced from 30 to 5 days.
In addition to all of the aforementioned benefits, MRP II and
our new location scheme has given us a side benefit. It enabled
us to design a Bulk Kit Pull System, allowing the Stockroom
Supervisor to combine multiple kits that have common parts or
locations. A computer screen allows him/her to see the percent
of commonality that will be realized by grouping multiple kits
together. This capability enables a stock clerk to go to a bin and
pull all of the material for these multiple kits at one time, while
making a single pass through the stockroom. It also allows the
stockroom supervisor to assign multiple stock clerks for zone
picking of the kits as needed. This tool has allowed the stock-
room supervisor to maximize limited resources.
The Stockroom has changed its stocking practices. Incoming
material is not just stocked, but prepackaged and bar coded in
small quantities for easy counting and withdrawal.
STOCKROOM SPC PROGRAMS
In mid-1989, selected individuals were trained in SPC. To date,
Material Control has initiated six SPC programs including “Win-
dow Requisition Process Time,” “Kit Verification,” “Cycle In-
ventory,” “Stocking and Controlling of Raw Printed Circuit
Boards,” “Repetitive Material Handling in Dock to Stock Pro-
cess” and “Stocking & Control of Shelf Life Items.” During this
presentation I will discuss the SPC team’s assignments, the steps
taken, and the benefits realized by the first three SPC projects.
Window Requisitioning Process Time
In October 1989, our first SPC effort was started by the Stock-
room. An SPC team was established.
Assignment: To assess and improve the process of withdraw-
ing priority material required on the manufacturing floor. Goal:
Reduce cycle time to 15 minutes.
Listed below are the steps taken by the team to meet its as-
signment.
• Data was collected from 10/23/89 to 11/01/89 and used
to produce a control chart of the process. Results showed that
the process time was three to four hours.
• A flow chart was developed of the current process, which
showed that there were actually two parts, the requisition ap-
proval cycle and actual stockroom pulling of the material. The
flow chart showed there were 20 steps to the process and con-
cluded that the delay was neither one of these processes, but
rather the queue time. The team recommended we reverse the
process when dealing with priority requisitions and was able to
reduce cycle time for the issuance of parts from to 8 minutes.
But the improvements didn’t stop there. During the review
process, it was noted that most of the employees authorized to
withdraw material from the Stockroom did not know how to fill
out the required paperwork properly.
The team took these next steps to ensure the continuing suc-
cess of the program:
• It designed a step-by-step visual aid to show how to fill
out the paperwork completely.All employees authorized to with-
draw material received this aid. Employees who still filled out
paperwork incorrectly lost their privilege to withdraw material
and their supervisor would be required to authorize all with-
drawal of material.
• It designed a “Requisition Rejection Notice.” If the requi-
sition was incorrectly completed or deficient, it was returned to
the requester. The Requisition Rejection Notice was attached to
the requisition, indicating what information was incorrect or
deficient.
In December 1993, the average process time for a window
requisition was 3.6 minutes.
Well, the improvements didn’t stop there either. The team
wanted to find a way to further improve the process itself. It
had been measuring turnaround time from the time the requisi-
tion hit the stockroom window. The team decided to look fur-
ther out in the process and try to improve the cycle from the
time the part requirement originated.
To do this, the team had to focus on who the stockroom’s
customers were. A further review of the process showed that
the stockroom actually had two customers, primary and second-
ary. Whenever the primary customer, a Test Technician, needed
a part, he or she would have to request it from the stockroom’s
secondary customer, Planning, or to the Shop Floor Controller.
The team quickly realized that this added an extra step to the
process and prevented the Stockroom from directly servicing its
primary customers, the Test Technicians.
The team also noticed that 95 percent of the “priority” requi-
sitions were for category C parts. So working with the Planning
department, the process flow was revised to move the Planning
task from the middle to the end of the process. This revised pro-
cess flow would be used only for category C parts. This new
process flow allowed Test Technicians to drop off a request for
material at the stockroom window and return immediately to
the job he/she was working on. The stockroom would review
the request and pull the material, if it was a category C part, and
deliver it to the Test Technician’s work bench. After the parts
were issued, a copy of the requisition is sent to Planning, so the
appropriate MRP transactions can be accomplished. If the mate-
rial requested was not a category C part, the stockroom will no-
tify planning of the request for material.
The average process time for this delivery service in Decem-
ber 1993 was 4.4 minutes.
The benefits realized from this SPC project include:
• Reduced STOP-WORKS
• Reduced SETUPs, an approximate cost savings of $30,000
annually
• Increased service and happier customers.
In October 1989, our kit release cycle time was 30 days. If that
wasn’t bad enough, shop floor audits of kits pulled by the stock-
One Stockroom’s Formula for Success: Doing More with Less, Smart Stockroom Management = Just Great Service

3. 1997 International Conference Proceedings 299
room always uncovered discrepancies within the kits. Here the
Stockroom had another opportunity to use SPC, and we did.
Kit Verification Process
Assignment: Eliminate the need for 100 percent Kit Verification.
Goal: Improve Kit Accuracy by optimizing the process and per-
forming random audits.
Here are the steps taken by the team to meet its assignment.
Kit release process and cycle times were analyzed. Data was
collected from kits that were being processed by the stockroom.
All errors identified were profiled by type.
At weekly staff meetings, the following items were reviewed
and discussed:
• Methods of improving work output
• Becoming more responsive to customers’ needs
• Reading of suggestions from the newly installed sugges-
tion box.
Supervisors had one-on-one discussions with stock clerks on
the types of errors they were making.
A process flow chart was developed that revealed 28 steps in
the process. It was concluded that the kit pulling process dif-
fered from stock clerk to stock clerk and needed to be standard-
ized.
The Stockroom Leader wrote and distributed a six-step pro-
cedure, “Steps for Self Verification of Kits.”
By April 1990, The Kit Verification Area reported minimal
errors on kits pulled after February 1, 1990. That month we dis-
mantled the Kit Verification Area and commenced doing ran-
dom audits of kits in the stockroom. Kit Pull Accuracy from 1990
to 1993 has remained above 99.5 percent since starting this ran-
dom auditing process.
The average cycle time for a kit is 2 days and our accuracy as
of December, 1993, was 99.6 percent.
The Benefits realized from this SPC project:
• Kit release cycle time cut from 30 work days to approxi-
mately two days
• Stockroom better able to respond to customers’ needs
• Elimination of unnecessary forms
• Daily hours required to support verification activity cut
from 32 hours in 1989 to 4 hours in 1990—the 87.5 percent re-
duction saved about $56,000
• The Kit VerificationArea (888 square feet) was eliminated,
resulting in a cost savings of approximately $14,0000 per year
• Weekly hours required by manufacturing to reverify kits
cut from 32 hours to zero. This 100 percent reduction of realized
a cost savings of about $22,000.
The last SPC team I’m going to tell you about is one that many
people don’t even think of when they think of SPC. But it has all
of the characteristics found in an SPC project.
Cycle Inventory Program
Assignment: Establish Cycle Inventory Program that meets and
supports the needs of MRP II and Material Management and
Accounting Standards. Goal: Identify improvement opportuni-
ties and the needed procedures and tools for maximizing the
reliability of the inventory process.
Early in 1989, we started training some selected individuals
in Cycle Counting—how to select control groups, reconcile er-
rors, and report their findings to management.
From June to October 1989, we performed a wall to wall in-
ventory of the first program to be converted to MRP II. This be-
came our baseline from which we used to measure the accuracy
of our inventory. Upon completion of this inventory we reported
a “before” (physical quantity counted plus or minus any paper
in flow) reconciliation inventory accuracy of 83 percent.
During the first year of the program, we uncovered a consis-
tent problem. Every time we used our scales to count a part,
there was an error. We decided that a team of stockroom person-
nel would evaluate our scales. After four weeks, the team sub-
mitted its findings and recommendations to management: that
the scales were outdated and inadequate to correctly weigh the
type of parts we were stocking and new scales should be pur-
chased. They also recommended that these new scales produce
a bar code label for better identification of material.
But it did not stop there. The team also wrote the required
capital equipment request and the justification for three scales
with bar code capabilities costing approximately $30,000.
As our Cycle Inventory program gained momentum and we
gained experience with MRP II in the first year (1990), we suc-
cessfully completed 7,084 cycle counts and our “before” (physi-
cal quantity counted plus or minus any paper in flow) reconcili-
ation inventory accuracy was 93 percent. But, after a great deal
of diligent teamwork over the past three years, our “before” rec-
onciliation inventory accuracy has been over 98 percent for the
last two years. In fact, at the close of 1993, we successfully com-
pleted 17,926 cycle inventory counts and our “before” reconcili-
ation inventory accuracy was 98.9 percent.
Listed below is a summary of the steps taken by this team to
meet its assignment:
• Perform wall-to-wall inventory, establishing Baseline In-
ventory.
• Establish Cycle Inventory tolerances of ABC Classifica-
tions. Example:
Quantity Inventory Percentage Class
+ 0.2 A
+ 1.0 B
+ 5.0 C
If any additional classes are required, establish them (and the
appropriate tolerance required).
• Utilizing master schedule of End Item deliverables, estab-
lishABC classification of each part number on Bills of Materials.
• Using ABC analysis report, establish a Cycle Inventory
Plan of how often to count ABC classes during year.
• Perform daily selection of part numbers to be inventoried
using ABC analysis in accordance to plan.
• Generate Cycle Inventory cards and submit them to Stock-
room Daily.
• Return all cycle inventory cards to Reconciliation Group
daily.
• Perform check for all paperwork in flow pertaining to part
numbers inventoried.
• Compare inventoried quantities to balances in inventory
system (MRP II).
• Load all inventory information into Cycle Inventory Sys-
tem.
• Generate Reconciliation work reports.
• Reconcile all discrepancies and assign error codes. Ex-
amples:
− Missed Location. Location is available and given.
Counter overlooks location. Quantity that is discrepant is exact
quantity found in given location.
− Missing Document. Document appears as a require-
ment/replenishment, but has not been processed.
− Part Number Pulled Wrong. Document reads one part
number and Stockroom personnel pulled a different part num-
ber.
− Cycle Count. Counter miscounts. Recount card is issued.
New count matches original system quantity. No discrepancy.
One Stockroom’s Formula for Success: Doing More with Less, Smart Stockroom Management = Just Great Service

4. 300 APICS—The Educational Society for Resource Management
• Enter final report information into weekly error profile
spreadsheet.
• Report results of Inventory accuracy weekly.
• Discuss errors occurring in stockroom at weekly staff meet-
ings.
• Isolating errors: Hold one-on-one discussions with Stock
Clerks on the types of errors individuals are making.
Our Cycle Inventory program is textbook. The only thing you
will not find in textbooks is the commitment of the Material
Control staff to be the best they can be.
The benefits realized from this SPC project:
• 98.8 percent “before” reconciliation inventory accuracy for
year end 1993
• Material is there when you need it
• This Cycle Inventory Program has been accepted by all
our customers in place of doing a yearly inventory of their ma-
terial stocked in our stockroom (a requirement of Cost Plus pro-
grams)
• This Cycle Inventory Program has been found to be in
compliance with MMAS practices.
SUMMARY
Here are 10 elements that may be of help to you in obtaining the
inventory accuracy level we have.
• education and training (MRP II, SPC)
• responsibility and accountability
• transaction processing system (MRP II)
• transaction audit trail (MRP II transaction history by P/N)
• cycle inventory program
• controlled storage areas
• stockroom layout and material flow
• location and identification system
• proper equipment and tools (scales etc.)
• performance measurement and reporting (cycle counting,
SPC)
In conclusion, by taking advantage of what MRP II and SPC
had to offer and meeting the challenge of change, the stockroom
has created a environment of “working smarter, doing more with
less, and supplying superior service.” This work environment
made us a benchmark within the company and for other com-
panies.
ABOUT THE AUTHOR
David O. Campbell Jr. is currently Materials Manager forAnorad
Corporation in Hauppauge, New York. Prior to Anorad, he
worked for AIL’s Systems Inc. as Manager of Material Control
and Project Control Supervisor, and at Fairchild Republic Com-
pany as Materiel Control/Systems Supervisor, Buyer and Mate-
rial Analyst. He has been a member of APICS since 1981. He
holds a Bachelors Degree in Business Management from the State
University of New York at Old Westbury and has over 24 years
of Material Management experience.
One Stockroom’s Formula for Success: Doing More with Less, Smart Stockroom Management = Just Great Service