HomeMy WebLinkAbout04.b. Receive status update of Warehouse Inventory Cycle CountsPage 1 of 2
Item 4.b.
F__1_448�411C_S0
October 25, 2022
TO: FINANCE COMMITTEE
FROM: WARREN GAINES, SENIOR MATERIALS SERVICES SUPERVISOR
REVIEWED BY: PHIL LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE STATUS UPDATE OF WAREHOUSE INVENTORY CYCLE
COUNTS
At the June 21, 2021 Finance Committee, a discussion was held an expenditure related to assisting the Material
Services division (Warehouse) with building inventory cycle count functionality. The minutes for the meeting
record the following:
Check No. 302618, Information and Computer Services for $36, 000 (Page 17 of 65): Mr. Leiber
stated the conversion to the Oracle Enterprise Resource Planning (ERP) system did not provide
the stock- inventory functionality that the former Sun Gard system provided. Staff had to contract
with a third- party vendor to help streamline the ability to perform the important internal control
function to reconcile stock on -hand vs. system -count that was used in Sun Gard. This cost
relates to the barcode and scanners needed for cycle counts to be more easily managed. There
was a discussion about cycle counts and Member McGill' s recollection of past issues. Ms. King
stated the Warehouse counts every inventory item at least once a year, with higher- dollar and
volume items counted twice per year. Mr. Bailey recalled the issue mentioned and stated a prior
Committee had been informed of what appeared to be a significant discrepancy, but further
investigation showed there was none. Since that time, inventory on -hand versus system
recorded amounts have been tracked as a Strategic Plan metric and discrepancies found to be
minimal. The Committee requested an update on future inventory count activities, not
necessarily quantities but outcome, be brought forward for informational purposes. Ms. King
replied she would provide an update moving forward. Member McGill complimented staff on
their work to update the expense descriptions which has helped with the Committee's review
This memorandum provides a current status of the inventory cycle count issue, and the improvements that
have been made.
Background
The Warehouse is charged with providing the necessary spares, equipment and supplies to ensure
Central San craft personnel can properly respond to planned and unplanned asset management repair and
preventive maintenance activities.
There are several methods available to manage inventory, and various methods are used at Central San.
One approach is to segregate the inventory into various segments either by items issued or usage, item
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unit cost and or inventory value. Materials Services has decided to distinguish the inventory using the
"ABC" analysis inventory management technique with VALUE being the primary sort or segment. One
way of looking at it is Pareto's 80/20 rule. For instance, 80% - 85% of our inventory dollar value and
spend is tied to approximately 20% of the total inventory items. This approach is used so that extra care
can be given to those items which are not only critical but also hold the most value. Using this approach,
low dollar items are assigned into an `A classification. Conversely, `C'-items, the lowest assigned
classification in terms of stocked inventory value meaning one line -item will not exceed an approximate
value of $2,800 yet is 60% of the total inventory line -items, yet only around 11 % of the total inventory
value. This is not to say that lower cost items such as gloves and Tyvek suits are less important as to
maintain in inventory, but germicidal lamps hold an even a higher priority as they are of higher cost and
even more directly essential to Central San's mission of treating wastewater.
Managing the inventory using the previous HTE ERP system was adequate and had many robust
features, it lacked some modern features which are now present in the web -based Oracle ERP inventory
system. For instance, now the cycle count program is fully automated and set up to run every Monday
morning based upon the prescribed ABC categories, and it uses class counts instead of manual inputs
as determined by the Materials Services Supervisor. Inventory items are stratified using the ABC
classification by value with A -items holding 85% of Materials Services inventory spend and 20% of the
inventory items. A and B-items are counted twice annually, with C-items counted once during the fiscal
year.
The counts are accomplished by using the RF-Smart Barcode program and barcode scanner
technology. The RF-Smart company partnered with Oracle which enabled the cycle count program to
work seamlessly and efficiently. This work or implementation was completed from the period of
November 2021 to January 2022 and was an enhancement to the base Oracle ERP. Even more
importantly, the entire counting process is now fully automated since we can now input counts directly into
the barcode scanners without the need of keying cycle counts from inventory worksheets which can
increase error opportunities. The report out on the most recent Quarterly Inventory Metric QTR 4: Book
Value counted = $127,369.56. Count Value = $127,640.82 which is a Net Difference of only $271.26,
representing an accuracy of 99.9978%.
The transition from the previous HTE system had challenges, but using modern technology like Oracle
and RF-Smart will enable Materials Services the means to keep up with current best practices and
become more efficient in all areas of inventory management and control.
Strategic Plan Tie -In
GOAL SIX. Infrastructure Reliability
Strategy 1 - Manage assets optimally
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