Is poor inventory management costing you time and money?
Anodised Aluminium Shafts CNC Machined by Challenge Engineering
What is inventory management? Which system best suits your production model?
Inventory management is the process of keeping track of all material, parts and products that you have in your factory or warehouse. A well run, real-time inventory management system can provide a bird’s eye view of your manufacturing operation. It can highlight problem areas and alert you to any issues well before they become a major stumbling block.
Inventory management can be as simple as creating a spreadsheet that contains all stock items. Every time you use a component or sell a product, this must be manually recorded. This is not ideal and there are many smart software systems on the market that handle this task far more efficiently. However, the smartest software in the world is useless unless it is fed with accurate real-time inventory data.
This article aims to give a brief overview of different inventory management systems along with some technologies used to streamline data acquisition.
Inventory Management Systems
Material Requirement Planning (MRP)
MRP links two main categories namely; dependant demand, and independent demand. Dependant demand refers to all the components that make up finished goods. These can include raw materials, or pre-built sub-assemblies. The amount of these items required is driven by the production levels which are in turn driven by sales forecasts. Where the level of production is driven by outside factors, this is called an independent demand.
MRP systems use a production plan as a basis to determine the requirements for individual parts and raw materials. This can be broken down by three main questions;
What is needed?
How much is needed?
When is it needed?
Just in Time Management (JIT)
JIT manufacturing is a relatively risky method of manufacturing as it works by keeping only the required inventory to manufacture and sell products. This method has the advantage of being able to change relatively quickly between products, as there is no risk of having excess raw materials and components that need to be worked through before new products can be manufactured.
The danger of this method becomes evident when there is a sudden spike in demand for a product and the supply chain is unable to adapt to the increased demand. A robust supply chain is critical with JIT managed manufacturing. This is where having a close relationship with your CNC machining company can assist.
Inventory Management Technologies
QR or Barcode Scanning
Barcodes are already widely used as inventory management tools in supermarkets, however their use in a manufacturing setting is not very common.
As soon as a component or sub assembly leaves one part of the factory it can be scanned and the database can be updated to reflect the current inventory status. Depending on the stock levels, the procurement department can be alerted to order more components to eliminate the risk of running out of stock.
Barcodes cannot typically hold a lot of data, they usually just contain a serial number that can be used to point to a parts’ details on a database.
QR codes are basically 2 dimensional barcodes and can thus carry up to a hundred times more data than a typical barcode. This means that in theory, a QR code can hold basic component and product information. QR codes are usually scanned with a smartphone and there are phone attachments on the market that streamline this process. This makes it an ideal system for a small company as the cost of implementation is low.
RFID (Radio Frequency Identification)
RFID technology is very simple in principle, it is usually made up of a microchip and an antenna. Data can be read and written onto the chip by means of a reader. The tag can contain all the details of that specific product or component. This is more powerful than traditional barcodes as RFID tags can be read from a distance of a few metres. Furthermore, multiple tags can be read at once. If a large quantity of components or products leaves a control point in a factory, the inventory management system will be updated instantly. It would be time consuming to read hundreds of barcodes or QR codes manually.
Some tags can be overwritten. This means that when a part has moved or changed in any way the data on the tag can be updated.
RFID tags can also serve as a security mechanism to raise an alarm if someone attempts to move a component or product from the factory. If a product is ever returned by a customer due to a defect, the tag can be read and the manufacturing history can be accessed via the inventory management system database.
As a company grows it becomes increasingly important to maintain optimum efficiency. Having more than the required inventory can seem less risky, but overstocking inventory runs the risk of that product or component falling out of demand or becoming obsolete. This can result in massive losses.
Furthermore, locking up resources in excess inventory robs your company of capital that can be used elsewhere. A well run, real-time inventory management system can provide a bird’s eye view of your manufacturing operation. It can highlight problem areas and alert you to any issues well before they become a major stumbling block.
At Challenge Engineering, in Sydney Australia, we machine custom metal and plastic components, and pride ourselves on great customer service. We can manufacture and deliver anywhere in Australia. Please contact us and find out how we can assist your business.Sign up to Challenge Engineering’s blog, send through a Request A Quote form, email us or phone (02) 9632 0010.