What is Activity Analysis?

In the world of Inventory Management, there are many classes of inventory. A key component of a robust inventory management process is to define, segregate and measure, from there we need to develop and implement action plans by the various categories. This method of inquiry by segregation is called Activity Analysis.

Activity Analysis is basically the task of delving into and capturing the complexities and nuances of whatever complex process you are attempting to manage or improve. In a process improvement framework it is akin to defining the current status of things by asking and answering the following kinds of questions:

1. What are the activities and/or categories in the process of interest?
2. Who are the owners, customers, and suppliers of each activity?
3. What do they do for the sub-activity and how much time is spent?
4. How is success defined – what are the measures, the KPI’s?
5. What is the value-add of each sub-activity, classification?

The above can be accomplished in a variety of ways including interviews, observations, process mapping, flow charting, Pareto analysis, and any of the litany of tools in Six Sigma and Process Improvement toolbox. The analysis has to be complex enough to capture the details of what is being done.

In inventory management, Activity Analysis may frame the aforementioned questions as follows:

1. What are the various categories of inventory?
   • Raw Materials and Finished Goods Classifications
     • ABC Demand Classification of material sub-class
     • ABC Classification of sales orders
       • Frequency, mean time between orders
       • Size of orders in terms of items, volume, weight, revenue.
   • Locations and Categorization
     • Geography
     • Replenishment
     • Staging & Distribution
     • WIP
     • Returns
     • Vendor Managed Inventory
     • In-Transits for Raw, Pack and Finished Goods
     • Incoterms of purchased materials
2. Who are the owners, customers, and suppliers? Who are the suppliers and customers for each?
3. What are the specific tasks required to manage these various classifications, locations, and categorizations? What is the value and non-value added of the tasks?
4. How is success defined? What are the measures, the KPIs?
5. What is the objective and improvement challenges for each classification, location, and categorization? Divide the classes, locations, and categories into segments of hard, medium, and easy to improve based on the objectives and improvement challenges.
6. What is the value add of each sub-activity, classification?

There is no wrong way to do an Activity Analysis. The analysis and data collection needs to be as detailed as your business to help determine the decisions that need to be made. Once this is done you will be able to define exactly the decisions that need to be made or the nature of the project at hand.

Check back soon … Our next blog will focus on Activity Analysis for new warehouse or re-layout of an existing warehouse.