A system that keeps an eye on stock before the line stops

A minimum stock level falls short

Most warehouse systems know the concept of a minimum stock level: when stock falls below the threshold, the item turns red. The trouble is that the threshold is static and production lives. The same stock of raw material lasts three weeks in a quiet month and four days when two large orders land at once. The „red light” then comes on too late - often after the planner has already assigned the orders to the lines.

The second weak point is how this information reaches people. Stock levels are visible to whoever opens the right screen. If nobody opens it, the system stays silent. The knowledge sits in the database, but it does no work.

How to do it better

In an application tailored to a specific company you can build a mechanism that watches the warehouse the way an experienced production manager would - only it does so every hour and is never on holiday.

The mechanism has three elements:

1. Demand calculated from accepted orders. The system knows the accepted works orders and their process plans, so it can work out how much of each raw material the next week or two will consume. Stock becomes the answer to a question: how many days of production will the material in the warehouse cover, given the orders already accepted.

2. An alarm threshold tied to the lead time. Every raw material has its real lead time: one supplier delivers in 3 days, another in 3 weeks. An alarm makes sense when it comes on earlier than the lead time plus a margin. Then material ordered on the day of the alarm arrives before the stock runs out.

3. An alert that goes out to people by itself. When the condition is met, the system immediately sends a message to the buyer, the production manager or wherever it is needed: which material, how much is left, how many days it will last, which orders are at risk and which supplier it was last bought from. A separate important element is the change history: every issue from stock and every correction leaves a trace, so when the numbers disagree, you can see who touched the stock, when and on which order.

What this means for the owner

The maths is easy to do with your own numbers. An hour of line downtime costs the wages of the people who wait, plus the depreciation of machines standing instead of earning - with a modern machine park often the biggest item - plus the lost production and any penalties for missed deadlines. On top of that come the firefighting costs: buying material at a higher price, express transport, reshuffling the production plan around whatever happens to be in stock. Each of these costs has a single source - the information about the shortage arrived too late.

The alert mechanism reverses the order: the information arrives while the material can still be ordered the normal way, with no surcharges and no nerves. The company also keeps its safety stock closer to real need, because the system watches it continuously - less money sits frozen in material bought „just in case”.

Where to start

To build such a mechanism you need data the company usually already has: stock levels, accepted orders and consumption rates from recipes or the process plans of individual products. If these three things live in different places - in the warehouse program, in the planner’s Excel and in the process engineer’s head - then connecting them is the first step. This is exactly the kind of application I build: tailor-made systems in which the warehouse, orders and process plans are one database, and alerts are a permanent part of how the system works.

A good starting point is a list of the five raw materials whose shortage would hurt the most. For those, you can see fastest whether the mechanism holds up.

If you would like to talk about such a mechanism in your company, write to me or book 30 minutes straight away in the calendar below.

More texts about systems for manufacturing companies are in the Knowledge section.