Re: floor stock items

We have items whose unit price is a fraction of a cent but we consume them in 
such volumes (hundreds of thousands a day) that the question is more one of 
accurately counting them, which we do with sample weight system.

Then there are items whose consumption accuracy is doubtful.
There is a point in production where someone wraps 6" of masking tape around 
a sub-assembly, but they get the 6" by human tearing off of reel, not any 
machine for chopping into right length pieces, so the way to handle this is 
to have safety stock & short lead times in case we do run low.

Once upon a time we tried to have cartons in our BOM.
Certain customers wanted 1000 items per carton, or 1500, or 500, or other 
fairly standard volumes, so we defined 1/1000 of a carton as being consumed 
in the BOM, or inverse of whatever quantity they wanted - there is a round up 
issue here for partial shipments.

That sort of thing really needs a reorder point ... when we are down to the 
last stack of cartons, or certain volume of reels of masking tape left.

One problem is lack of standardization in the identification of different 
kinds of cartons, and that some may be interchangeable but some are not.

There is also risk of some people treating good inventory as if it is floor 
stock, when it is not.  

Example - we make samples for customers before finalizing BOM & routings - 
there is no shop order - how do we consume the raw materials involved, or 
cost our samples?  We don't, we treat the disappearing components as if it is 
unreported scrap.

Ditto electronic testing boards.

Our last inspection step is to stick finished wiring harness on a testing 
board that runs a serios of electrical tests through the product we have just 
made & illuminate some colored lights to verify correct final.  These testing 
boards are made out of the same materials as the product we make for 
customers & the materials needed are treated by the engineers as if it is 
floor stock, without any formal inventory transactions to record the cost of 
their construction.

When I asked why,
I was told that the volume of materials used in samples & testing boards is 
proportionally so microscopic compared to volume in production for customers 
that it was not worth tracking cost or inventory accuracy involved.

MacWheel99@aol.com (Alister Wm Macintyre) (Al Mac)

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