california based disk drive manufacturer
The Pinnacle team was hired by the Director of Logistics to locate substantial missing inventories in their regional distribution centers, determine what had caused the problem in the first place, and develop a system that would prevent such crises in the future. The company was using third-party distribution and warehousing vendors to transport and store their merchandise, deliver it on a just-in-time basis to several of their largest customers, and provide up-to-the-minute status reporting for the units held in inventory. Recent physical inventories indicated that “losses” of inventory exceeded $300K in one distribution center, and $2 million in another.
The Pinnacle team:
- Designed a custom application that automatically reconciled the inventory records of the manufacturer with those of the third-party distribution vendor on a line-by-line basis.
- Verified that almost none of the “missing” inventory had actually been lost. Instead, the EDI signal for the shipment to the customer had not been received.
- Identified the un-processed shipments, thereby enabling the manufacturer to invoice their customer for the delivered goods and relieve the inventory in the warehouses.
- Accounted for $340K of “missing” inventory in one distribution center and $2.1 million in another.
- Fully documented the custom application and trained the users.
The reconciliation program proved to be so useful that it was expanded to cover all 14 regional distribution centers. Going forward, discrepancies between the manufacturer’s and distribution centers’ records were noted and reconciled promptly, thereby preventing a recurrence of the initial inventory shrinkage problem.