Inventory Control - What's in your Kitchen?

Ahh inventory... The ultimate Catch-22 of the production world.  Too much and you waste space, tie up money in WIP and risk loss, damage and obsolescence.  Too little and you risk bringing the whole line to a halt.

Good inventory management balances the risks (and costs) with the operational benefits (flexibility and protection).  I've heard inventory described as an insurance policy, or the peaceful ocean that conceals the jagged rocks of production problems below.

There are ways to minimize inventory through proper production planning and just-in-time (JIT) strategies. However, you can never totally eliminate all inventory.

Try to imagine your kitchen with no inventory.  No pantry.  No refrigerator.  Supplies arrive just as they are needed and only the exact amount that will be eaten is cooked.  Sounds ideal doesn't it? No leftovers to turn green and furry in the back of the fridge.  No lettuce liquefied in the crisper drawer.  No can of beans lost for a decade.  Nice, but not practical in real life.

First, there is the problem of minimum order quantities. I've never come across vanilla extract sold by the teaspoon.  Second, there are the added costs of shopping everyday.  Unless you happen to live or work in the same building as a Bulk Barn and green grocer, you will waste a lot of time everyday.  Third, buying just the quantities we need eliminates our ability to capitalize on price breaks for buying in larger quantities.

So what's in your kitchen... er, my kitchen.  There are lots of food type items in my kitchen from produce to pasta and meat to mustard.  I am a baker, so I usually have 3 or 4 different types of flour.  We also have in stock 3 or 4 different types of rice.  We have a pantry, a refrigerator and a chest freezer.  We are well stocked.

Not every item in my kitchen requires the same level of monitoring and attention.  Just like not every item a company buys gets the same level of attention.  A critical component that costs thousands of dollars and takes weeks to order in will be monitored much more closely than say, toilet paper.

Splitting inventory into categories is often done in an ABC system based on annual dollar volume.  A being the top 15% , B the next 35% and C the remaining 50%.  The key here is VOLUME, not unit cost.  A 5 gram tin of saffron can cost upwards of $20.00 but will last you may months.  According to the USDA Weekly Beef Report (yes, there is such a thing) you can spend $15.99 on a pound of fillet mignon that gets consumed in one meal.  In a given year, you probably spend more on carrots than you do on saffron.

Typically, you would have an ERP system that could calculate this all out for you and you'd know exactly which items are in which category. I don't have one of those.  I could calculate it out by hand, but frankly, I don't have that much time on my hands so we'll make some assumptions.

Splitting the items this way makes it easier to make the shopping list because I'm not reviewing every item in the kitchen to see if we need more.   Some 'A' items are restocked on a weekly basis, things like fruit and veggies.  Other items in this category are bought as needed based on the meal plan, cuts of meat or unique produce.  'B' items are restocked when they reach a minimum safety stock, when we are down to one meal worth of pasta or rice.  'C' items are only replenished when we run out.

Now, on to how much to buy.  The easy answer is "as much as you need", but there are a few factor to consider:

1) Is the unit price less for larger package sizes?
2) How much space do you have?
3) What is the shelf life?

Let's look at an example, All-Purpose Flour.

You can buy flour in very small quantities at a bulk store or 20 kg bags at a wholesale club store, and the unit cost will vary considerably.  Flour also has a shelf life, 10 - 15 months according to Good Housekeeping and less if you live somewhere hot and humid without air conditioning.

I price checked All-Purpose Flour this week and here is what I found:

At first glance, the wholesale club pack looks like a bargain (we're going to ignore membership costs here), it is less than half the unit price of the 5 kg bag.  But is buying a 20 kg bag of flour really a good idea?

To give you an idea of how much flour that actually is, you're looking at approximately 40 loaves of bread worth. A full bag is approximately cubic foot in volume, which is a lot to store in a small kitchen.  

So let's say you have the room for a 20 kg bag, when does it really become a good deal?  Take a look at the graph below.  Assuming the flour will be stored properly and has a shelf life of 12 months, you can see at which quantities each option is the best deal.

If you use less than 4 kg of flour a year, then buying from the bulk store is the more economical option.  Between 4 and 5 kg, you are better off buying the 5 kg bag at $8.49.  If you will use more than 5 kg of flour in a year, the 20 kg bag is the most economical option at $11.99.  But what about holding costs?

I did the math on the holding cost of a 20 kg bag of flour in a rented 610 sq ft condo in Toronto.  Based on the volume of the condo and the volume of the flour, less than $5.00 of your annual rent would go to storing the flour.  In this case, it's not about the dollars, it's about the opportunity costs.  Storing the flour means you can't store something you might need or want more.  

So now you know what you have and how much of it you are going to buy.  But how can you keep track of it?

Here it is, Ops Mama's 3 Rules for Inventory Management in your kitchen.

1.  "Out of site, out of mind".  

Stick with containers you can see through and try to keep like with like.  Also, if you have a chest freezer that isn't in your kitchen, keep an inventory on your refrigerator door or inside your pantry.  That way you can see your entire stock from one room.  I use a sheet of white board stuck to the inside of the pantry door.

Next, the see through containers.  I try to use containers that I know the approximate volume of.  Canning jars are great for this, they come in standard sizes so I can quickly approximate how much is in the container.  This will also keep dry goods fresher and safer from pests. 

Avoid having items too many rows deep on a shelf, it is too easy to forget what is tucked away at the back. Yes, this is my pantry. And yes, I have an unhealthy relationship with my label maker.  But it sure is easy to find things when I'm cooking.

2.  "Know when you're going to run out, before you run out".   

This especially applies to items that don't get measured every time they are used and are always kept in stock, things like spices and oils.  Or toilet paper.

For these items, I use a two bin system.  One container is for daily use and is replenished as needed from a larger container stored separately.  When the larger container is empty, there is typically enough in the small container to last until more can be purchased.

3.  "First In, First Out".  

When you make your weekly meal plan, take a look at what you have in stock.  Is there something in your freezer or fridge that is about to reach it's expiry date?  Do you have the dregs of several types of frozen veggies that can go in a quiche or stir fry?  Use them up first.  Then decide what needs to be bought to meet your weeks planning needs.

So dear readers, now it's your turn.  What do you do to keep your refrigerator from filling up with petri dishes of mold?  How do you make sure you have the ingredients you need?

P.S.  The label maker is optional.

Operations Planning - What's for Dinner?

Tell me if this sounds familiar:

You get home at the end of a busy day and say to your partner "What do you want to do for dinner?" The reply "I don't know, what do we have?"  You open the fridge and start to think about what you can do with mustard, three mini packs of soy sauce and something that may have been a sweet potato.  Closing the fridge you wonder if you are either a) back in University or b) a contestant on the Food Networks' Chopped.

You have fallen victim to the old adage of the 7Ps, Proper Planning and Preparation Prevents Piss Poor Performance.

To define good performance, let's start with the customer requirement:

Tasty, healthy, balanced meal served promptly at a scheduled meal time.

Gourmet is not a requirement, nor is multi-course, nor is homemade, at least not in my house. Take-out and frozen pizza grace our menu several times a month.  This is not about cooking better.  It's about improving the efficiency of your evening routine.

So how can we help ensure this happens?  First, take a look at how dinner gets to your table.  The obvious answer is, you have to cook it.  But before that you need to prep, store, transport and buy the ingredients.

But before all that, it starts with proper planning and preparation.

Planning meals is a lot like planning jobs in a manufacturing facility.  In some ways, it's much easier.  First off, you control your own demand, which makes it easy to forecast.  It is highly unlikely that you are going to have to feed 2 people one night and feed 25 people the next night without substantial notice.  You also get to pick your product, what you make for dinner is really up to you.

This discussion on planning is going to be highly qualitative in nature.  Unless you are trying to level out your meatball production rates to meet weekly quotas with consistent staffing levels, a quantitative aggregate production plan won't really do you any good.

Why Plan Meals in Advance?

Good question.  First off, it reduces the stress of trying to figure out what to eat when you should just be cooking.  Next, it allows you to shop in advance and have everything you need on hand.  This means less trips to the grocery store, which is more economical and efficient.  You also won't get half way through a recipe only to realize you need a lemon or a potato ricer only to find neither in your cupboard.

How to Plan Meals in Advance?

When you're meal planning you want to look at the three basics of production planning:
1) Production rate - how many people are you feeding and how many meals
2) Workforce level - who's available to cook on any given day
3) Inventory on hand - what do we already have in stock, either finished meals or ingredients.

You'll also want to keep in mind things like economic conditions (can you afford filet mignon three times a week), market demand (does anyone want brussel sprouts) and the availability of raw materials (in-season produce is often tastier and cheaper).

And don't forget the current skill level of your workforce.  If your partner is a five-star Michelin chef, he or she can probably whip up an omelette before hockey practice.  If it's your 15 year old babysitter's turn to get dinner on the table, you may want to order a pizza.

Let's look at some examples:

I have an appointment in the afternoon and my husband won't be home until late that evening.  That means little time to prepare dinner as I also have to keep an eye on the little Monkey and get her to bed.  So this day would be a good candidate for something already prepared in the freezer.

If I don't have anything going on during the day, but the evening is busy then something I can prepare in advance is a good option.  Time to breakout the slow cooker.

We have a group of friends coming over for a weekend BBQ.  We'll know how many we're cooking for and any food restrictions and select a meal accordingly.

Planning Your Menu

In our house planning is done on Sunday morning before our main grocery shop.  We take a look at the calendar (also on the fridge above the menu) and pick meals based on our time and availability during the week.   We'll pull out the cookbooks and recipe cards and pick meals that meet our planning requirements based on time and availability.  Once the meals are planned, the grocery list is made and shopping done (more on that when we look at inventory management).

There are lots of ways you can write out your plan.  Some people just scratch it out on the back of an envelope.  I like to see the whole picture and have a magnet set on the side of the fridge.

Home Made Simple used to offer a printable template for the cards but have pulled it from their website.  Instructions for how you can make your own can be found here: DIY Weekly Menu Planner.  Or look on Pintrest and you'll see lots of meal plan options; magnets, chalk boards, PostIt Notes etc.

This magnet system has some advantages for me.  First, it is easy to rearrange meals if our plans change during the week.  Second, I have our go-to meals pre-printed on the cards, this way I don't have to come up with a new dish every night.  The blank magnets are dry erase sheets so I can easily write in and wipe off meals.  And third, the magnets allow me to pin recipes up under the day of the week, saving me time finding the recipe during the week.

Once the plan is in place, preparation and execution can occur with less stress, less time and less effort.  

And hopefully fewer frozen pizzas.

REFERENCE:

Jacobs et al. Operations & Supply Management 12th ed. McGrawHill Irwin 2009. ISBN 978-0-07-340329-8

Root Cause Analysis and The Crying Baby

Good problem solving always involves getting to the root of the problem.  Treat the disease, not the symptom.  You can't just pull the head off the weed.  Avoid "Band-Aide" fixes.  You get the idea.

In order to really, truly, solve a problem and not just mask it you need to get to the bottom of the issue.  To the root.

This leads us back to The Toyota Way to look at how to really analyze, understand and solve a problem.

Liker, J. The Toyota Way. pp 256. 2004.

The basis for this process is that you need to first understand a problem and then find your way to the root cause of the problem.  So let's begin.

"It's 2 AM and I'm awake and staring at a crying baby."  This is a problem.  At 2 AM it is seems like huge problem.  It's also a vague problem.  A baby crying unto itself is not a problem.  Baby's cry to communicate.

The first step in Toyota's problem solving process is developing a thorough understanding of the problem and the ramifications of the problem.  They call it getting to the "True Problem".

So what is the problem? 

To get to the True Problem, you need to ask the question "What is the result of this?"

Point of Recognition: Crib, the Baby is crying often during the night.

Therefore: I have to get up, my husband wakes, the baby isn't well rested.
Therefore: Everyone is tired, sleep deprived and frustrated.
You could take this further and look at the results of us being tired, but we'll stop here for now. You get the idea.

So the True Problem is that we are tired, sleep deprived and frustrated. It's possible that there are alternate reasons for this, stress at work, physical discomfort etc.  However, if I were to graph our hours of uninterrupted sleep, you would see a significant drop off right around the time we welcomed Monkey into the world. For simplicity here, we'll only do the root cause analysis on the baby related sleep interruptions.

Ideally to analyze a problem you go directly to where the problem is occurring, Go to Gemba.  In this case, I'm living it.  Every night.  I don't recommend trying to analyze this problem crib side in the middle of the night.  If you do, it will likely go something like this:

Problem: The baby's crying

Why?  How am I supposed to know, I don't speak baby.

Why? She's hungry or wet or lonely or too cold or too warm

Quick! Change her and feed her while singing her favorite song.  Wake up husband to dig space heater out of basement. I have no idea whats wrong, but one of these things will make her stop crying.

No, this is a rational process that requires rational thought.  You are a better person than I if you can achieve this half asleep holding a crying infant.

I suggest instead you use an After Action Review, conducted quietly during nap time or after the little Monkey has gone down for the "night".  But to do this, you need a record of what actually happens.  You will not remember what Monday night was like on Friday.  To gather this data, I created a visual tracking board that looks something like this:

It has the time of day across the top and the days down the side.  It's easy to use, simply color in the boxes.  You can track as much or as little data as you like.  In our case, blue is sleep, green is feeding, orange is activities and the x's are diaper changes.  I also leave notes in the margin for things like vaccinations, illnesses, travel, anything out of the ordinary.  This will allow you to easily see patterns in behavior and quickly identify macro trends.

You can download a pdf copy of the template here: http://goo.gl/2RYS3g

Now we have some data, Let's Get to the Root Cause - On to the Five Whys

Problem Statement:  My family is tired and frustrated.

Why? We are unable to get sufficient uninterrupted sleep.
Why? Baby wakes every 1 - 2 hours
Why? Baby is over tired (I had to consult some sleep experts to figure this one out,  due to a language barrier I couldn't just ask the little Monkey)
Why? Insufficient naping, Too long between last nap and bed time, Too late bed time. (As shown on tracking chart)
Why? Nap schedule not enforced, Bedtime not adjusted for age.

Why? Mama didn't do her homework.

So as you can see, the real cause of the my sleep deprivation is not that Monkey is hungry or tired or cold.
   

It's that I have no idea what I'm doing.