Inventory Management
9 CVSN INSIDER May 2009 Now is the Time to Sharpen the Saw (part 1) A few weeks ago, I had an interesting conver-sation with a childhood friend who just hap-pens to be one of my distribution clients. We were at a wedding and started to talk about his business. I know that his revenues were down considerably and the order activity was slow. He mentioned that he has read a couple of my past articles and those from other industry consultants. He said that he was finally getting a chance to catch up on his strategic thinking. Now that he isn't running around like a chick-en with his head cut off, he is taking advantage of the slower pace to position the business for an eventual economic turnaround. Now is the time to sharpen the saw. I have been hearing a lot of negative comments about business in general, mostly from talking heads in the media. I read about negative sta-tistics and indicators in the news. The airwaves and even my inbox is full of negative reinforce-ment. Fortunately, on main street, I have found a little optimism for the small business owner. Rather than worry about things you have little control over, concentrate on making strategic changes where you can. Dust off that old operations manual and start looking at your business practices. Did the abundant sales of the last few years cause you to become sloppy? Have you developed a little spare tire around middle management? Now that you aren't struggling to keep up with the order process, it's time to whip that business back into shape. Rather than becoming overwhelmed with the whole organization, start looking at functional pieces. Since the majority of my background and experience resides in distributor opera-tions, I will confine my thoughts to these areas. Believe me, there is no shortage of people who will tell you how to improve sales. I just don't happen to be one of them. Inventory Accuracy Wouldn't it be way cool if what the computer said we had on the shelf was actually what we had on the shelf? Crazy thought. Most of us think our accuracy is pretty good because our dollar variance was minimal when we took our annual count. Dollar variances are for bean counters. Don't get me wrong, I respect the ac-counting side of any business. I just think that dollar variances are misleading. We should look at unit variances to get a more honest snapshot of accuracy. Go out into your warehouse and count 50 items at random. How many of your counts were exactly what the system said you should have on the shelf? I would venture a guess that your accuracy percentage is a lot lower than you thought. Many distributors have accuracy around 50 or 60 percent when we measure the hard way. Inaccuracy in inventory hurts you in several ways. It will force your customer service peo-ple to go count the shelves when a customer orders a quantity close to what the system says we have. If you don't believe me, just ask your people. Bad counts can hurt you from the INVENTORY MANAGEMENT The Distribution Team Jason Bader Managing Partner