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You Might Have A Bad Warehouse If... The Sign "Keep Door Closed During Audit" is Displayed

By Kate Vitasek | 06/28/2010 | 6:19 AM

This bad warehouse practice is brought to you by Gary King founding partner and chief consultant at Business Fit Associates.   Gary reveals highly questionable auditing and inventory management practices of a company he witnessed during an ISO audit. 

"I was accompanying an ISO Registrar during an ISO 9001: 2000 pre-certification audit," he wrote. "At this particular warehouse distribution location that served fortune 500 companies as a 3PL, we came across a trailer backed up to an open dock door with its trailer door closed. A sign hanging from a chain attached to a light fixture just inside the warehouse read: 'Keep Door Closed During Audit'.

When the auditor asked about the purpose for the sign the response from the dock supervisor was: "This is where we put product that we didn't have time to identify or determine who it belongs to. We didn't want you to include it in your audit."

Gary continued: The auditor's response was can we have a look anyway? The dock supervisor' replied, 'I guess its okay since the trailer is outside of the warehouse you can't count it in the audit anyway, right?'  Without waiting for a response from the auditor, the dock supervisor rolled the door up and exposed a trailer filled front to back with pallets of customer product.

When the auditor asked how long it took to fill the trailer, the dock supervisor said not long, 'We filled it on second shift last night; it took us about two hours. The other three trailers out in the yard took us a couple of days because we were busy cleaning up and getting ready for your visit.'

At this point Gary says he excused himself to use the the men's room, "Where I proceeded to laugh out loud for at least five long minutes before I could compose myself enough to rejoin the auditor on his walk through."

Funny? Yes, but the incident exposed a serious problem at this warehouse. The activity that Gary described defeats the whole purpose of an inventory audit -- or any audit for that matter -- that is, to get the most accurate count possible of the stuff on the shelves and its value.

Not to mention time that was wasted “getting ready” for the auditor’s visit.

And how is it possible for even the most perfunctory of warehouse management systems to have four trailer loads of product laying about that can’t be identified? Plus they were essentially hidden outside of the warehouse. It almost sounds illegal.

This episode reveals not only an unwholesome and resistant approach that undermines the auditing process, but it also leaves money and product off the books and … where? In addition it reveals a shocking and unethical approach to inventory management training.

This was an out of control inventory control system. As The Warehousing Education and Research Council Best Practices Guide notes, “Well-documented and defined processes are the foundation of inventory control. Processes should detail specific tasks and requirements.” Do I need to mention that those specific tasks should not include middle-of-the-night inventory moves to prepare for an audit?

The guide adds that defined and documented procedures “should be the only way inventory is managed and transactions processed,” and employees must have a “complete understanding” of those procedures and expectations.

“Documented processes should be the only acceptable way.” Hiding product ruins any hope of an accurate, documented cycle count or properly measuring inventory activity.

As the guide further explains, it’s also all about achieving the “right company mindset…inventory accuracy must be seen as every employee’s responsibility, not just the responsibility of those who perform inventory transactions.”

In this case keeping the door closed illustrates a cockeyed mindset, leaves money somewhere in limbo, and product in the dark.

I really love your feedback - and love your contributions to share those bad warehouse stories to help educate the profession on what NOT to do, and maybe what to do if you’re not doing it.

If you've got an example of a bad warehouse practice, send me your story and photo(s) to [email protected]. If I feature your example in one of my blogs, WERC will send you a free copy of the WERC Warehousing & Fulfillment Process Benchmark & Best Practices Guide (a $160 value).

Your submission can be anonymous if you like so you don't get your boss or company in trouble! I'll be collecting examples all year and the winner will receive a free warehouse assessment by Supply Chain Visions, a $10,000 value. The runner up will win a free conference registration to the WERC 2011 conference (a $1,375 value).

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About Kate Vitasek

Kate Vitasek

Kate Vitasek is a nationally recognized innovator in the practice of supply chain management. Vitasek is founder of Supply Chain Visions—a boutique consulting firm specializing in supply chain management. She is also a faculty member at the University of Tennessee's Center for Executive Education. A prolific writer, Vitasek has authored the Council of Supply Chain Management Professionals' best-selling mini-book series, Supply Chain Process Standards, and has contributed to other management books as well. Along with Karl Manrodt of Georgia Southern University, she co-leads WERC's popular annual benchmarking study.

About Steve Murray

Steve Murray

Steve Murray is a Principal Consultant and Chief of Research for Supply Chain Visions, a boutique consulting firm specializing in supply chain management. Prior to joining Supply Chain Visions he held a variety of functional and management roles in the distribution and manufacturing sectors, including 15 year managing an IT consulting firm. Steve has been instrumental in development of the Council of Supply Chain Management Professional's "Supply Chain Management Process Standards", the Warehousing Education and Research Council's Warehousing & Fulfillment Process Benchmarking & Best Practice Guide" and the WERC "Warehouse Certification Program". He is lead auditor for the WERC's Certification Program.


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