The Quest for Accurate Inventory Records - A case study of the scrap management process at a Swedish manufacturing company in the automotive industry

Abstract: Inventory record inaccuracy (IRI) occurs when the inventory system records and the physical inventory level do not align which can result in reduced operational efficiency and increased operational cost. Every situation where inventory is transferred physically or in inventory records can be potential sources of IRI. The purpose of this study was to examine a manufacturing company’s scrap management system and how it affects the company. With a mixed methodology, containing both quantitative and qualitative methods, three objectives were used to register the effects and cover the study’s purpose. Firstly, to identify vulnerabilities of the current system employed. Secondly, to identify trade-offs and other operational effects that the current scrap management system causes. Thirdly, to compare the current method of counting scrap with an additional, more automated system at the company. The findings indicate that the vulnerabilities of current scrap management system originate from its high dependency of human interaction. To achieve more accurate inventory records the company were found to sacrifice production time as well as time used for value adding activities for employees, trade-offs identified to be caused by the current scrap management system. The comparison confirms the company’s choice of scrap counting system, where the more automated method proved more unreliable than the currently used system. Of the previous research regarding IRI in manufacturing environments simulations where found to be the dominant method of use. However, simulations tend to neglect the complexity and dynamics of the real manufacturing environment. Case studies focusing on IRI are mainly present when examining retail companies. The contribution of this paper lies in the in-depth and detailed case study, examining the field of IRI at a manufacturing company through the assessment and exploration of their scrap management system.