Continued from the previous post: Best Practices for Raw Materials Management- Part 1 of 2
Picking and Issuing
Proper labeling and disciplined putaway processes will accurately record the location of raw materials. The pick process should be driven by FIFO and the issuing process captured in real time as the product is consumed. Using backflush processes to automatically issue raw materials cost based on finished goods output is only suitable for materials that represent less than 10% of a product’s costs.
Often there is an excess of raw materials that can be returned to inventory. To support accurate tracking of these ‘ends’, you will need to overlay a dimensional component to the existing tracking information. For example linear feet to track the remaining amount qty on a roll of paper.
Labeling and proper raw materials putaway are essential to ensuring FIFO picking and accurate inventory accounts. Furthermore replen or let down processes must be driven by inventory management systems that can better identify the appropriate reserve stock locations to support replenishment of pick faces.
Inventory Cycle Count
Raw materials count frequencies should be based on an ABC analysis of your inventory. Basically, the annual sales and current inventory value will dictate the rating of each product and hence its count frequency from monthly to once per year.
While this is not an exhaustive list, this does represent the ‘low hanging’ fruit. Managing your raw materials is not an option – it’s a necessity.