Reducing Variance in Inventory Reporting
Inventory reporting sits at the heart of operational and financial accuracy. Yet, for this organization, the gap between the General Ledger (GL) and the Inventory Sub-Ledger had grown alarmingly wide — reaching nearly USD 4 million in variance. This was more than a reporting error; it was a risk to decision-making, financial integrity, audit readiness, and leadership confidence. Teams were working hard, but the process was fragmented, unclear, and inconsistent. What should have been a reliable flow of data had become a complex maze of manual tasks, unclear responsibilities, and repeated errors. The business needed stability, accuracy, and a system it could trust again.
When Lean Partner began the assessment, we uncovered a pattern familiar in many organizations undergoing rapid operational growth: the work was happening, but the structure around the work was not strong enough to support accuracy at scale. Staff had no standard operating procedures (SOPs) to guide them. The process varied from person to person because there was no documented workflow. Two different sets of project or task codes had to be entered manually, greatly increasing the chances of human error. A large portion of data fields in the system were irrelevant, confusing users during data entry. Slow system performance and connectivity issues further delayed transactions, while backlog errors accumulated during blackout periods — all of which compounded the variance in reporting.
The deeper we looked, the clearer the picture became: the organization did not have a standardized, end-to-end process for inventory reporting. There was also no RACI chart to define accountability and ownership, leaving staff unsure who was responsible at each stage. Human error was not a symptom of incompetence — it was the natural outcome of an environment with no clear structure, limited training, and inconsistent process flows. What the organization needed was not more effort, but greater clarity, automation, and alignment.
Lean Partner worked closely with the inventory, finance, and operations teams to redesign the entire workflow from the ground up. We standardized the project and task codes to eliminate unnecessary duplication. We established clear, documented SOPs to guide every step of the process. A new RACI chart clarified roles and responsibilities, ensuring everyone knew exactly who was accountable for each activity. We eliminated irrelevant data fields, improved the system’s stability, and proposed automation to streamline manual steps. Equally important, we conducted refresher training to reinforce correct practices and reduce dependency on memory or individual assumptions. As a result, the organization had not only a standardized process — but a smarter, faster, and more reliable one.
The transformation was dramatic. The number of process steps dropped from 11 to 9, effectively reducing complexity by 18%. The time taken for inventory reporting decreased from 8 hours to just 2 — a 75–80% improvement. Most importantly, the variance between the GL and the Inventory Ledger was reduced to zero, restoring financial accuracy and operational credibility.
The final outcomes of the improvement were powerful:
- Zero variance between GL and inventory ledger
- Error-free posting of material issuance
- Elimination of unapproved inventory adjustments
- Inventory reporting time reduced from 8 hours to 2 hours
- Process steps reduced from 11 to 9
- Annual cost savings of RM 50,000
- Clear SOPs, RACI, and standardized processes established
This project stands as a strong example of how standardization, process reengineering, and capability building can restore accuracy and trust in core financial operations. By turning ambiguity into clarity and complexity into structure, Lean Partner helped the organization achieve sustainable, long-term operational excellence.