Reconciling stock? Act now or pay later ...

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Related tags: Supply chain management, Third-party logistics, Logistics

Reconciling stock? Act now or pay later ...
I lost an argument three months ago over the frequency with which stocks should be reconciled between a manufacturer and his new third-party...

I lost an argument three months ago over the frequency with which stocks should be reconciled between a manufacturer and his new third-party logistics provider (3PL).

I argued that they should be reconciled daily so stocks could be updated on the manufacturer's IT system. In this way, by 9am each day, both systems were working on the same base data. With such accurate and timely data, customer service could make the necessary fulfilment promises to the customers. Both parties argued that it was unnecessary and that weekly would suffice. For technical reasons it wasn't possible to run the 3PL warehouse using the manufacturer's IT system, nor for electronic communications between the two to be automatically linked into either system.

In a new relationship, it takes weeks before every transaction in the warehouse is captured and accurately reflected in the electronic messages required to carry out later manual reconciliation of free stock. Every day that went by without such reconciliation meant that 'gaps' in the information flow would accumulate and stock discrepancies would be hard to identify retrospectively.

The result of not putting in the resources required to deliver daily reconciliation was that weeks went by before the weekly reconciliation took place. It has, indeed, proved impossible to identify the precise cause of a range of stock discrepancies. Customer service is making promises that cannot be fulfilled and striking off product that is actually in stock.

It is unlikely that this problem will be resolved satisfactorily for either party. The 3PL records some transactions under an umbrella function that does not separately identify transactions that the manufacturer records discretely. The resources required to resolve the issue as far as is possible retrospectively will exceed the resources that would have been needed to do the job correctly every day. I guess there are some lessons that have to be learned the hard way!

Tim Knowles

is partner at supply chain consultancy TKA. Contact him at tim.knowles@proactive21.com

Related topics: Supply Chain, IT, Services

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