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Error creation rate (errors per week) is roughly proportional to
the number of transactions. Many systems require far more transactions than necessary
and, thus, accumulate more errors than necessary. These errors must then be removed with cycle
counting or physical inventory.
Reducing transaction volume improves accuracy and reduces cycle counting labor. It also
reduces transaction input labor. In some instances, the cost of transactions exceeds the cost of
items being tracked!
What Drives High Transaction Volume?
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Figure 8- Functional Layout
Functional layouts require many moves. Many moves
require many transactions and increase the probability for error.
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Complex Processes
Some inventory systems have excessive transactions because the underlying manufacturing
process is complex and disjointed. Figure 8 illustrates how a functional layout and organization
has complex material flows. the system may require two transactions for every material move.
Data = Control Fallacy
People sometimes assume that more data makes for better control. However, this is only true
when the data is both manageable and well-managed. It must be accessible, well-formatted,
concise and monitored frequently. Many inventory systems are built with far too many transaction
points under the assumption that this gives better inventory control.
One Method For Everything Assumption
Another unspoken assumption that sometimes underlies scheduling and inventory systems is the
idea all products and processes should use a single method. This needlessly complicates a
system.
Most factories have a wide variety of products, volumes and demand characteristics. Some are
amenable to simple, visual control while others are not. If one method is used for everything,
that method is usually a complex computer-driven MRP/ERP system.
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Unnecessary Data
Inventory system designers may collect data because it seems easy and the data might be
useful. This may include unnecessary transactions. Once installed, the transactions are
institutionalized and rarely get reviewed for necessity.
Reduce Transactions With...
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Figure 9 Cellular Layout
Cellular or "Product-Focused" layouts require
fewer interdepartmental moves and fewer transactions. Fewer transactions produce fewer
errors.
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Cellular Manufacturing
Cellular layouts can reduce material moves and transaction volume by 80% or more. compare
figure 9 with figure 8. ...More on Cellular
Manufacturing,
BOM Simplification
Complexity and unnecessary transactions may result from complexity in the BOM. Multiple
layers of subassemblies seem to lend order and logic. These extra levels then carry over into
manufacturing. The result is unnecessary inventory and transactions.
BOM Simplification Example
Backflushing
In Backflushing, the inventory system is setup to relieve inventory of piece parts when a
transaction is made for completion of an assembly. There may be several levels of subassembly in
the BOM that the system assumes takes place. Backflushing and Phantom assemblies are
alternatives to restructuring the BOM.
Kanban, Broadcast, Direct Link & ROP
Kanban and broadcast are simple visual systems that operate outside the MRP framework. Used
appropriately, they can simplify the scheduling and inventory system. for more on this, see our
page on Integrating kanban and Other methods.
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