In any business where inventory is involved, the good
inventory management
can definitely reduce the cost and improve the overall efficiency. The
Supersonic Five Team have chosen to examine the inventory management
procedure of
the service department of the UGA Transit, and to cut cost for the
department.
The service department we have worked with is part of the UGA Transit
system. It oversees 41 buses of which the models range from 1982 -
1997. At present, the service department holds an inventory of 1200
items with a value of $90,000. As well as the rest of the UGA Transit
system, the service department funding is fully sourced from
transportation fees paid by students every quarter. We used several
analytical tools that proved very helpful in our
examination. A flow chart was used to record the different steps that an
inventory item actually went through, and we were able to identify the
problem. A fishbone diagram was used to look at different causes of the
problem.
On the fishbone diagram, causes are specified why inventory inaccuracy
kept happening. First, the mechanics did not report the parts they used in
work order form until a job was done. Secondly,it took a long time to
record when an item was retrieved and when the
information about that item was actually put into the inventory records.
For example, it might take a mechanic a long time before he could finish
the job and fill out the work order, and it may also take a while for
the foreman to make a record for the item used. Moreover, the inventory
spreadsheet, which was prepared by the foreman for the parts specialist,
had chances of inaccuracy. The foreman made the spreadsheet based on
the work orders on hand, but work orders of the buses still being fixed
were not available until the buses were completely repaired. There were
also times when the foreman put incorrect ID number of the parts on the
spreadsheet. Finally, the information processed by the parts specialist
could come out wrong because the specialist could make mistakes in
deciding what items would be ordered.
The solution to the costly problem is simple but effective. The solution
is the implementation of placing the logbook in the stockroom. When an
inventory item is retrieved, the information about the item is recorded
in the logbook right away. The foreman would monitor the recording and
update the inventory database accordingly. We have
concluded that the logbook is the best possible way to reduce the
human error.
The flowchart sketches out the entire process of how a part is retrieved.
In the past,when a mechanic decided which part was needed, he did not
inform the parts specialist;
instead, he just went to the stock room for the part and fixed the bus.
After the job was completed, the mechanic filled out a work order that
specified which part was used. He then handed the work order to the
foreman.
When the foreman decided the work on the buses had been completed, he
recorded the information about the parts used in the inventory, and created an inventory spreadsheet. The spreadsheet would then be
delivered to the parts specialist who monitored the number of parts left
and decided how many to order and when to order.
According to the fishbone diagram and the flowchart, we concluded that the
mechanic is the weak spot of the process. Information about any item
retrieved out of the stock room should be recorded immediately and
correctly. New order schedules made by the parts specialists should be
based on this information, instead of that on the work orders which are
usually delayed and have too many other factors involved.
Apart from the inefficiency, the problem "ends up costing thousands of
dollars each year", said the foreman.
Furthermore, extra expenses for the next-day air also arose out of the
human error. The service department spent about $1,000 a year on the
express mail-in of parts and supplies needed after the initial inventory
order. Of this $1,000, $500 was spent to process the unusual items that
the department
did not keep a stock of, and the other $500 was wasted on ordering items
unexpectedly out of stock.
We have initialized the implementation of the logbook for one week in the
service department, and the reaction has been all positive and optimistic.
"The program cut the time I had been wasting on checking inventory data at
least by 10 hours per month (which means $2,400 a year, considering the
foreman's
salary is $20 per hour) ," commented the foreman, "and it will eliminate
the $500 spent on the next-day air originated from out-dated schedule."
Should the success continue, there will be vast improvements in the
inventory control in the service department of UGA Transit, which will
result in a yearly reduction of costs of at least $2,900 and an overall
improvement in efficiency.