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Other Added - Why Your Current Approach To Inventory Management Is Not Good Practice And Is Costing You Money
I heard this comment at a National Speaker's Association meeting last month: "Being your own boss is the hardest way to make easy money." Boy, isn't that the truth!So many people I speak with dream of becoming self employed and starting their own small business. Don't get me wrong: being self employed is the best lifestyle I know. It has a huge range of rewards, from flexibility to independence to self-responsibility. I'm completely in love with being self employed and wouldn't e
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. Howe
International firms accelerated their globalization operations over the last few decades because of the development of the internet, improved telecommunications technology, the unending quest for cheap labour, improved international trade laws and treaties; and a spate of mergers and acquisitions forcing companies to be increasingly competitive. Improved telecommunications technology has also been a factor in the increase in global trade and investment. Cellular technology, wireless e-mail and all the spin
The problem is that most software relies on optimisation and this limits the opportunity to reduce inventory because it ignores external influences. Software can only optimise the values it has, not what could be.
World's best practice inventory management demands that the ‘management system’ is optimised not just the inventory. Most inventory software takes today’s data and runs an algorithm to optimise holdings. What they miss are the changes in the management system that could further reduce the total level of investment. This flaw makes software systems self-limiting in their results.
Inventory management is much more than just the software system. Inventory management is the combination of know-how, process, measures and reporting that together provide the opportunity for maximizing availability while minimizing cash investment.
The five reasons why your inventory management is not best practice and is costing you money are:
1. The Responsibilities Are Misaligned
The people that make the day-to-day decisions will typically not be responsible for the working capital outcomes; they will be responsible for availability. The problem is that if you run out of stock all hell breaks loose but if you overstock there is no repercussion. This is especially the case with indirect inventory that is not subject to the usual planning scrutiny. Given this, what do you think most people do? That’s right, they over stock!
2. The Optimization Is Incomplete
Sophisticated software can track all sorts of data and in many cases the software can make optimization decisions based on that data. This can reduce your inventory but it is self-limiting. The problem is that software optimizes only on known data and ignores process and behavioural changes that can impact that data. This is software optimization not system optimization. The software should only be a tool within a bigger process of optimization.
3. It Is Managed Reactively
Inventory is often seen as ‘set and forget’, that is, once the item is optimized for the current situation the requirements are not systematically revisited. It is often only when there is a ‘cash crunch’ or some other emergency that action is taken. Yet, even indirect inventory can represent millions of dollars of investment and deserves frequent attention. When action is taken it usually addresses the highly visible items rather than the real ‘cash burners’.
4. There Is A Significant Time Lapse Before Problems Emerge
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. Howev
A recent report, titled "The War for Talent" stated that over the next 20 years, employee talent will be what differentiates successful companies from those going bust. The late 90’s gave us a glimpse of the talent war, but was nothing compared to what’s ahead. Here are five ways to bulletproof your company before the battle begins.Practice What You PreachRecent studies of America’s largest companies show that a strong reputation for moral and ethical conduct performed better financially in t
Inventory management is much more than just the software system. Inventory management is the combination of know-how, process, measures and reporting that together provide the opportunity for maximizing availability while minimizing cash investment.
The five reasons why your inventory management is not best practice and is costing you money are:
1. The Responsibilities Are Misaligned
The people that make the day-to-day decisions will typically not be responsible for the working capital outcomes; they will be responsible for availability. The problem is that if you run out of stock all hell breaks loose but if you overstock there is no repercussion. This is especially the case with indirect inventory that is not subject to the usual planning scrutiny. Given this, what do you think most people do? That’s right, they over stock!
2. The Optimization Is Incomplete
Sophisticated software can track all sorts of data and in many cases the software can make optimization decisions based on that data. This can reduce your inventory but it is self-limiting. The problem is that software optimizes only on known data and ignores process and behavioural changes that can impact that data. This is software optimization not system optimization. The software should only be a tool within a bigger process of optimization.
3. It Is Managed Reactively
Inventory is often seen as ‘set and forget’, that is, once the item is optimized for the current situation the requirements are not systematically revisited. It is often only when there is a ‘cash crunch’ or some other emergency that action is taken. Yet, even indirect inventory can represent millions of dollars of investment and deserves frequent attention. When action is taken it usually addresses the highly visible items rather than the real ‘cash burners’.
4. There Is A Significant Time Lapse Before Problems Emerge
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. Howe
Thinking of starting a business? Maybe you should think about an existing, established business by purchasing a franchise. The company will already have a proven track record and operating system in place. Franchising creates opportunities and jobs as well as growth for the franchiser.Franchises often allow you to sell goods and services that are well known and recognized by the public. Brand recognition, advertising, group purchases, training, and support are just a few of the benefits of owning
2. The Optimization Is Incomplete
Sophisticated software can track all sorts of data and in many cases the software can make optimization decisions based on that data. This can reduce your inventory but it is self-limiting. The problem is that software optimizes only on known data and ignores process and behavioural changes that can impact that data. This is software optimization not system optimization. The software should only be a tool within a bigger process of optimization.
3. It Is Managed Reactively
Inventory is often seen as ‘set and forget’, that is, once the item is optimized for the current situation the requirements are not systematically revisited. It is often only when there is a ‘cash crunch’ or some other emergency that action is taken. Yet, even indirect inventory can represent millions of dollars of investment and deserves frequent attention. When action is taken it usually addresses the highly visible items rather than the real ‘cash burners’.
4. There Is A Significant Time Lapse Before Problems Emerge
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. Howe
Writing a business plan can be quite a difficult task for individuals new to the world of entrepreneurship. However taxing this task may prove, it is essential for the development and success of the business. When beginning your foray into developing your own company, be sure to put great thought and effort of the planning and writing of this groundbreaking document. This plan will remain with your company throughout its life as a reminder of the company's goals and aspirations.If you find writing
3. It Is Managed Reactively
Inventory is often seen as ‘set and forget’, that is, once the item is optimized for the current situation the requirements are not systematically revisited. It is often only when there is a ‘cash crunch’ or some other emergency that action is taken. Yet, even indirect inventory can represent millions of dollars of investment and deserves frequent attention. When action is taken it usually addresses the highly visible items rather than the real ‘cash burners’.
4. There Is A Significant Time Lapse Before Problems Emerge
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. Howe
Having been in business a number of years, I’m amazed at the number of people who don’t have the slightest idea of what customer service is. Customer service is not a way of doing things – it’s an attitude.I always love it when company’s send their people to seminars to learn about customer service. All the seminars will discuss the customer’s needs and expectations and the orator will package these ideas as new and cutting edge when in fact these very ideas were in practice over 30 years ago!
The number one question asked about inventory is ‘what do I do with slow moving or obsolete stock?’ Depending upon the accounting policies in your company this stock has taken 3–5 years to reach the point where that question is asked. By this time it often seems irrelevant to revisit the original decision or processes that produced this result. No one would accept this approach to quality management! No one ever asks ‘how do I prevent the accumulation of slow moving or obsolete stock?’
5. It Is Painful To Fix And Easy To Ignore
In most cases the removal of obsolete inventory will result in a ‘hit’ to the profit and loss account. However, if a reason can be found to justify it for another year then few will argue. Eventually someone is going to have to make a decision and it will be painful. For this reason, obsolete inventory decisions are often driven by the opportunism of results reporting rather than good management principles.
To truly achieve best practice your organisation must review these issues and develop systems that will minimize their impact or eliminate them altogether.
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