Putting Inventory Control in the Organization

A question was posted in LinkedIn on where to put Inventory Control in the organization, should it be under Finance, Planning, or Warehouse? Below was my response to this question.

Inventory Control Group being an integral part of the Materials Department is part of the Operations Group. However, this group must be independent in the sense that they serve as the auditing body of the Team. Putting it in Planning group will compromise the inventory and the way ordering is being managed, Putting it in finance is not a good idea as Finance does not have the resources to manage inventory, and it is outside of their scope, reporting to Warehouse group will also create bias as integrity in cycle count will be compromised. It is best to create an Inventory Control Group, reporting to the Materials Manager. The basic role of the Inventory Control Group would be:

1. Manage cycle count
2. Perform Variance Analysis
3. Monitors Material Accuracy
4. Audits business processes affecting Inventory such as, receiving transactions, picking transactions, managing of defective parts, warehouse processes, and others.
5. Ensure that MRP system inputs (inventory) is correct.
6. Monitor inventory status and ensure compliance to Net Inventory Turn Over.
7. Coordinate with planning and warehouse operations re discrepancies found in the process affecting material accuracy.

Depends on how your business is run, you can opt to do a cycle count based on parts classification. Others do a monthly four wall count, while others go for a daily cycle count, based on the complexity of the product and the amount of parts being managed.

To add up, Inventory Control by all means is something that is very critical in the operation. It is important that system transactions from the time materials are received until it is delivered to production, and shipped to customer must be accurate. As the saying goes, "garbage in, garbage out".. We wouldn't want to mess up the inventory, otherwise, you'll end up having excess and shortage disrupting the whole operation.