COG: Close to the truth

High stock levels are no problem for Ian Metzger. On the contrary: full shelves with a total of 44,000 items and 130 million individual parts are a prerequisite for C. Otto Gehrckens GmbH & Co. KG (COG) for the company’s ability to deliver.

Based in Pinneberg near Hamburg, the company has continuously expanded its market share in recent years. According to Metzger, the company’s managing director, the main reason for this expansion is the high level of supply availability across the entire product range. The articles are stored on an area of 2,600 square metres. It is divided “into an automatic small parts warehouse with three aisles, around 4,200 shelf spaces and 20,000 sectors, as well as a manual warehouse with around 9,000 shelves in 55,400 sectors,” explains logistics manager Steffen Buchholtz.

Counting as it was done 50 years ago

The relatively low commodity value of the rubber products and their minimal space requirements ensure compatible storage costs. So far, however, the legally required stocktaking – keyword inventory – has caused a lot of effort. In view of the gigantic quantities of stock items, COG had used the permanent inventory procedure. “The count was the same as 50 years ago. That’s why it was clear to us for a long time that we had to rationalize the inventory procedure,” remembers Andreas Dunst, responsible for accounting.

Inventory effort significantly reduced

The background to this is a German law that makes it much easier for companies to take stock: Section 241 of the German Commercial Code (HGB) permits sample stocktaking inventories. This is based on the phenomenon that about 20 percent of all stock items represent 60 to 95 percent of the stock value. When drawing up the inventory, the stock may therefore be determined on the basis of samples. A prerequisite is that the methods used comply with the principles of proper accounting (GOB). The quality of the inventory drawn up in this way is equivalent to the informative value of a conventional inventory. This allows companies to reduce their inventory effort by up to 95 percent.

A further prerequisite is that an IT-based, reliable inventory management system is used in the company. In the case of COG, this is the warehouse management software “Ci-log” in combination with the ERP system “Pro Alpha”. In addition, the warehouse should contain at least 1,000 items. The differences between book and count values must be within the permissible limits. In an automated warehouse, the error rate is often so low that even a so-called “sequential test” can be used. In extreme cases, a one hundred percent result can be achieved with a counting effort of only 30 items.

With COG, the stock levels proved to be so accurate that the sequential test can be used not only in the automatic but also in the manual warehouse. The effect is huge: Initially, COG calculated that the counting effort would be reduced from the original 44,000 to 2,500 positions. The sequential test reduced this figure again to less than 100 positions.

Six hours of inventory

But not only the warehouse, but also the planned inventory software should meet certain requirements. Above all, the program used must be certified by an auditing company. Only a few providers on the manageable market for inventory software fulfil this requirement – one of them is REMIRA STATCONTROL.

In October the first stocktaking took place after the software called “Staseq” was installed in September. The inventory itself is unspectacular: “In Staseq we load the inventory that should be available according to Pro Alpha’s specifications. The inventory software then calculates a sample list with items that have to be counted manually. In our case, in the end there were only 79 items”, explains Dunst. Within only six hours, the first inventory using the new procedure was completed.