The cost of control obviously should not exceed the cost of inaccuracies. The bottom line is the validity of the material plan. The range of tolerances employed should reflect their impact on the company’s ability to produce and ship on time. Our experience shows Class A users employ tolerances ranging from 0 percent to 5 percent,with none greater than 5 percent.
The question that remains is how a company achieves the necessary degree of inventory accuracy. The answer involves some basic management principles. Provide people with the right tools to do the job, teach people how to use the tools (called education and training,right?), and then hold them accountable for results. Let’s take a look at the specific elements in getting this job done.