Train your people. Staff and management often don't recognize
the true cost of inventory. The first step in getting control is to train them to be aware
of the implications of inventory and how to manage them.
Include the cost of inventory in your product and service
profitability calculations. You might be surprised when you include these costs in
your considerations. Some products or services might not be making enough money to be
worth your while unless you make major changes.
Track inventory value. Integrated computerized systems that
tie to shipments and receipts are very useful for high inventory activity businesses. At
the very least, use regular inventories and conventional tracking methods so all staff and
management have access to inventory records. Keep an eye on your balance sheet to see
where your cash is. Excess inventory is a waste of resources.
Set goals for inventory turns. Turns tie your inventory to
sales. Recognize what the benchmarks are for your business and work to exceed them. Turn
your inventory before it turns on you.
Make conscious inventory decisions. Staff and management teams
should be established to set and monitor practices and goals. Revisit your buying and
inventory practices on a regular basis. The world changes and so must you. Modern
enterprise-wide and inventory computer programs can be configured to make many routine
decisions for you.
Recognize and manage obsolescence and damage.
Time and change
have a way of diminishing the value of inventories. You must be aware of this to keep low
and no-value goods from tying up your cash and space. Learn where the obsolescence and
damage are coming from and fix the root causes.
Use just-in-time practices. Aggressive managers rely on
suppliers, logistics, and sophisticated requirements planning methods to ensure that the
materials they need are delivered when they need them. In addition, you might be able to
balance your work so that your finished goods and services are produced when needed and
not put into inventory.
Reduce the number of inventory items.
Every stock keeping unit
(SKU) or item you have in inventory costs you money. Reduce the number of supply, raw
material, and product items that you stock. Combine similar items, redesign your products
and processes, and delete unprofitable lines.
Reduce your storage space. Inventory expands to fill the space
allotted. The quickest way to mandate a reduction in inventory is to reduce the amount of
available space. People will have to get creative in how they use the space and manage the
inventory. You’ll know you’re on track when you have space left over even after
you reduce the allotted space.
Leave nothing to chance. Don't assume that past practices are
okay. Review your inventory practices on a regular basis and take action on what you
learn. Just because it's out of sight, doesn't mean that it can stay out of mind.
