Southeast Renewable Energy Manufacturer

Inventory Accuracy, Warehouse Optimization &, Scrap Reduction

Challenge

The operation was experiencing significant inventory-control problems that affected both material planning and production planning.

Inventory accuracy had fallen to approximately 63%, creating issues with:

  • Lost or unaccounted-for material

  • Over-purchasing

  • Emergency material expedites

  • Time-consuming inventory investigations

  • Inaccurate production-planning assumptions

  • Difficulty passing inventory audits

At the same time, scrap reporting was not accurately reflecting actual material losses. Incorrect scrap percentages distorted inventory consumption, created inaccurate system balances, and made both materials planning and production planning less reliable.

Approach

The improvement effort focused on identifying the root causes behind both inventory discrepancies and inaccurate scrap reporting.

Key actions included:

  • Root-cause analysis of scrap percentages and reporting practices

  • Correction of inaccurate scrap calculations and reporting methods

  • Standardization of inventory-control processes

  • Improved warehouse and material-handling procedures

  • Development and implementation of new inventory-management systems

  • Process documentation and standard work

  • Employee training on inventory transactions and material controls

  • Improved accountability for inventory movements and adjustments

  • Stronger alignment between physical inventory and system inventory

The objective was not simply to correct inventory counts, but to create processes capable of maintaining accuracy over time.

Results

Inventory Accuracy

Inventory accuracy improved from approximately:

63% → 96%

This improvement produced several downstream operational benefits:

  • Reduced lost and unaccounted-for inventory

  • More reliable materials planning

  • Improved production planning

  • Reduced emergency purchasing and expedited material costs

  • Substantially reduced unnecessary over-purchasing

  • Reduced labor spent investigating missing materials

  • Increased confidence in system inventory

  • Improved inventory-audit performance, allowing the operation to begin passing inventory audits

Scrap Reduction

Root-cause analysis identified problems in how scrap percentages were calculated and reported.

Correcting those issues improved the accuracy of material-consumption data and reduced unnecessary inventory adjustments.

Quarterly scrap costs were reduced by approximately:

27%

More accurate scrap reporting also improved:

  • Material requirements planning

  • Inventory forecasts

  • Production-planning accuracy

  • Purchasing decisions

  • Visibility into actual production losses

Business Impact

Inventory accuracy and scrap reporting are not isolated warehouse metrics.

Both directly affect purchasing, material planning, production scheduling, labor utilization, and operating cost.

By improving inventory controls, correcting scrap reporting, strengthening training, and implementing standardized systems, the operation gained significantly better visibility into its actual material position.

The result was a more reliable planning environment, lower purchasing and scrap costs, less wasted labor, and stronger inventory-control performance.

Key Results

Inventory Accuracy: 63% → 96%
Quarterly Scrap Cost: ↓ ~27%
Inventory Audits: Improved from failing to passing
Expediting: Reduced
Over-Purchasing: Substantially reduced
Material Investigation Labor: Reduced

Focus Areas: Inventory Management • Root-Cause Analysis • Scrap Reduction • Production Planning • Materials Planning • Process Improvement • Training • Operational Controls