Key Lessons in Lean Manufacturing and Production Management. (On Stock Control and what the Operations Manager said to the Business Owner.)

The owner of a very popular steakhouse in town walked into the busy kitchen just as, at that exact moment, one of the chefs spun around, accidently sending the 280g pepper fillet steak he was preparing onto the high-traffic kitchen floor. 

The owner winced, closed her eyes against the weight of the loss and then looked towards her operations manager. “What does our staff see when they walk into the freezer? Cuts of prime meat to be grilled. But for me? When I walk into the freezer, what I see there is: money! Hard-earned money. You and I just witnessed R299 being chucked into the bin!  When a perfectly good piece of meat drops on the floor and then just gets chucked away? … I dunno … ”  She turned away shaking her head. “How can we get them to understánd?”

What did the Operations Manager say that took her by surprise?

He said: 

“You and I cannot be here all the time to witness incidents like that, but an integrated business management system can. Yóú should set an example by treating your stock and your business with the care and respect it deserves.” 

What the operations manager was hinting at was: it is vital for a manager/owner to model exemplary stock control behaviour because leadership shapes company culture. When a leader demonstrates meticulousness in stock management, it sends a powerful message that inventory—a company's treasure chest—is valued and must be protected. “We have no way of knowing if it is the norm for that chef to be wasteful or careless, because we do not have a proper record system to see the problem areas as they arise. We find out about problems too late. Also: everyone seems to have too much access to the stock, therefore nobody will take accountability. You need to show your commitment by implementing proper stock management systems, to ensure real-time, accurate tracking over guesswork. You need a single system that gives you complete control in all aspects of your business.”

Why an MD leading by example regarding stock control is crucial: 

It establishes a culture that accuracy is not optional; it establishes a standard of accountability. Staff is more likely to diligently track inventory if they see the top leader treating it as a priority. An MD who models this, shows that inventory management is a strategic driver of reduced waste; of enhanced profitability. 

High-level visibility into stock management acts as a deterrent to theft and wastage.  

When employees know that the MD is actively involved in electronically tracking inventory, the risk regarding inventory "shrinkage" decreases. A leader who "practices what they preach" gains the respect of the employees, improving morale and overall team culture. Conversely, a “do as I say, not as I do” approach can destroy employee morale and invite negligence.

The Operations Manager was not finished yet. He continued: “Additionally, proper systems will make my job easier because it will directly prevent stockouts and overstocking as well. Establishing and strictly following clear, standardised documented procedures for receiving, storing, and issuing stock will mean having the right items available, ensuring that tasks are done more efficiently, reducing stress and freeing up employee time for other critical areas, like cooking the perfect steak, or mingling with the diners. Good inventory practices will ensure that we have stock numbers we can trust, orders do not get stuck somewhere, that the right items are available and that customers get what they came for. At the same time it will prevent your capital from being tied up in useless inventory. It is called ‘Operational Efficiency’, it is called an MD’s commitment to stock management, it is called the cost of care. Afterall, your stock is money, like you said.”

The CEO scratched her head and asked: “What would it look like? All the business operations automated by ERP?” 

To which the manager in control of operations replied: 

“It will look like a shift in focus: 

• No more working in the business. Instead: working on the business,
• No more day-to-day firefighting. Instead: strategic planning and risk mitigation, 
• No more manual inventory counts. Instead: forecasting demand and optimising supply chains,
• No more manual processing of orders and invoices. Instead: analysing sales trends and profit margins. 
•  No more micro management  of employees. Instead: developing talent, company culture and ethics.”

The Takeaway:

By modeling meticulous stock control, manufacturing leaders show that inventory is valuable and must be protected. Ultimately, a shift will take place from emotional responses to incidents (like "wincing") towards proactive, data-driven management of production materials, maximising profitability. 

This will result in a workplace where the CEO will operate as the System Owner, while the ERP will act as the operations manager!

( This was part 1 on stock control in a 2-part series on: Key Lessons in Lean Manufacturing and Production Management.)