Monday, December 26, 2011

Compensating, or compounding?

Back in the Dark Ages I managed parts departments for a few car dealerships.  This was back in the land before time, when dinosaurs, Renaults, and even worse-Peugeots, roamed the US.

Not this long ago

(Not this long ago)

One of the lessons I learned was about the curious views some people have about errors.  My introduction to this was during a discussion of inventory results with another manager.  Using made up numbers- let’s say we have $100,000 in inventory on the books, we count everything, make all the required adjustments, and end up with $99,000 in inventory.  There’s a grand missing, but that’s only one percent, right?  Assuming the industry standard of annual inventories, being off by one percent isn’t bad, right?

Here’s where a wrong idea leads us into the weeds, and compounds future errors in thinking.  The inventory dollar value was one percent short, but that does not mean the inventory was only off by one percent.  A more likely situation is that the inventory was $5-6,000 short on some items, and $4-5,000 over on others.  Someone got the wrong part, maybe swapped it for the correct one, and no one corrected the transaction history.  Maybe the wrong parts went out to customers who never used them (not going down the auto body shop/insurance industry rat hole today).  Who knows, but inventory always drifts.  Back to the numbers: let’s assume a $100k inventory with $6k in shortages and $5k in overages.  The value of the inventory is only off by one percent, but the inventory is off by eleven percent.  The errors do not offset, they compound.  What counts in inventory management is the ability to hand the customer the correct piece when they need it, incorrect counts on the shelf induce errors in ordering systems, obsolete parts returns, order shipments and other areas. 

It is a measurement problem at heart, in this case using the wrong scale (dollars) to measure inventory accuracy.  I’m not saying dollars don’t count, but some people always claim they are all that count.  Explain that to the guy who needs a left front wheel bearing for his Peugeot 504 but your inventory is wrong and you only have a right side bearing.  Hasn’t the poor guy suffered enough?

Luckily for us, this is just a walk down memory lane, I can’t think of any situations in InfoSec where we pretend offsetting errors compensate for each other instead of compounding the problem.  Nor can I imagine ever getting the metrics wrong.  It is awesome being able to be smugly superior to stupid folks like the guys down at the garage, isn’t it?