Back to Basics: Inventory Control

Inventory management is one of the most critical assets of an effective fast lube operation.  The purpose of inventory management is to know what products you have on hand, where they are in use, and how much is being sold.  This type of real-time data is essential to running a successful shop.  It is the accuracy of this data that drives whether your inventory process is successful.  Even with the most comprehensive inventory management system, if the data isn’t accurate your inventory control is compromised.  Let’s take a look at an example of how evaluating and ultimately changing your inventory control system and process could potentially save you time and money.

A STORY ABOUT INVENTORY ACCURACY

A number of years ago I was doing consulting work for a multi-store operator when I had an enlightening experience in regard to inventory control.  The operator was having some inventory issues so we decided to conduct some spot checking of inventory at one the their locations.  We gathered a team of five people to conduct the spot-checking which included the CEO, CFO, Vice President of Operations, District Manager and myself.  To test the current inventory control process, we selected one item to count.  We each independently counted the sum quantity.  When we were done counting, I was stunned to find that we had five different counts.  Five reasonably intelligent people could not agree on the simple count of an inventory item.  If the five people who are undoubtedly the most invested in success can’t agree on a simple count, how can we expect our bay techs to perform accurate counts? It is no wonder that we do not get accurate inventory counts at our stores when we have bay techs counting our inventory. Without a vested interest in accuracy, the focus typically shifts to speed.

That experience completely changed my perspective and attitude on taking inventory at the shop.  I quickly learned that counting inventory isn’t black and white.  Not everyone will make the same count and without a tightly controlled inventory process, you will likely experience errors.  Through this experience I learned that inventory is one of the most important facets of an effective fast lube operation and with a few small improvements, it can save time and money.

IMPROVING INVENTORY CONTROL

With a new perspective on inventory control, I have identified two primary aspects of the process that can help increase accuracy and save time.

1. INDEPENDENT COUNTS

To increase accuracy, I now firmly believe that we need to have 2 independent separate counts of inventory.  I have a trusted employee make the first count and then a second count is taken.  The two counts are compared and then any discrepancies are verified with a 3rd count of the item.  Once there is total agreement as to the actual count, only then are the counts entered into the POS system.  By creating a tightly controlled independent count system, we are able to accurately identify and track inventory.  While this system may seem more cumbersome, the end results cut down on re-counting and save time in the long run.

2. CYCLICAL COUNTS
A second reason that we do not get accurate inventory counts is that traditionally we count our entire inventory at the end of the month.  I now am a firm believer in doing cyclical counts.  By integrating daily counts into our inventory process, we increase accuracy and provide a higher level of inventory awareness.  Counting inventory on a cyclical basis means we need to create a calendar in which inventory for a small group of items is counted each day.  Typically employees dread the month-end inventory count because it can be such a long and difficult process.  By scheduling a regular daily inventory count, we cut down on mistakes and increase employee involvement.

NEXT STEPS

So what are the next steps to move from a month-end to a cyclical inventory system? Below are a few suggestions that will help you make the transition.

1. Create an Inventory Calendar
Prepare a list of all inventory categories and then equally breakdown those items into a 30 day calendar.  This way, everyone knows what inventory items need to be counted each day.  For an example of a cyclical inventory count calendar, please visit: “http://ints.com/docs/inventory-calendar.pdf”.

2. Create an Inventory Process
Create a simple, straightforward inventory process that anyone can follow.  This includes writing out the schedule, independent count procedure and any deliverables or expectations required.

3. Review
Create a review process at whatever incremental scale works best for you (weekly, monthly) to make sure your new system is operating effectively.  This process should evaluate the new inventory calendar, inventory process and any other changes you’ve made to your system.

SUMMARY

At the end of the day, it all comes down to saving time and money.  This means prioritizing the items that can have the greatest impact on your bottom line.  After a comprehensive evaluation of everyday inventory management, we can see that it is equally as important as labor management.  By making a few small changes in how you manage inventory control, you can increase accuracy, save valuable time and ultimately make your fast lube operate more effective.