Inventory management may be a less exciting supply chain topic but it is the linchpin in a manufacturing or distribution business.

No matter how many engaging conversations I have with clients, contacts and trade groups about emerging supply chain trends, the less exciting topic of inventory management often-times can deliver a higher value than the latest and greatest most-talked about trend. As the Programs chair of APICS Ventura chapter said when requesting this topic for a recent speech, inventory management is core to success and remains a timeless topic.

This prompted me to think about what I see across all types of clients: Whether a $5 million fast-growing manufacturer in the building products industry, an $80 million dollar food processing company or a multi-billion dollar aerospace company, I’ve found inventory management to be vital to bottom line results. Three of the top reasons inventory should be seen as core to success include:

  1. Inventory accuracy – If you cannot find the product, you cannot ship it. It can be as simple as that; however, it often goes much further. If you think you have more inventory than you do, you will not purchase or produce what you need to in order to fulfill customer needs. Certainly, this will prompt higher costs, poorer service and a host of other issues. Additionally, a critical asset is not valued correctly. Do I need to go on?
  2. Inventory levels – Most accountants prefer to hold less inventory as it ties up precious cash. Most Sales folks prefer more inventory because they don’t have to worry about it being available to sell. Most Operations folks prefer to run larger quantities so that they can optimize efficiencies and minimize downtime. Lean gurus prefer to resolve process issues so they can reduce changeover times to run less inventory. Managing risk could dictate more inventory if you are concerned about service if natural disasters or political events hold up your inventory. Managing cash flow certainly dictates less inventory. No wonder it can be such a tough challenge for often-times under-appreciated planners!
  3. Customer service – One of the goals of inventory management is to have the right product in the right place at the right time. It sounds easy enough yet rarely is easy. Often-times, inventory is available somewhere in the system but isn’t at the right facility at the right time to satisfy customer requirements. What good is it if you have inventory in Miami when you need it in Seattle? Worse than none since you have cash tied up without the benefit. Since customers have little patience as there are typically competitors waiting in the wings, poor customer service (or even mediocre service vs. the competition) can have a detrimental effect on your business.

Inventory can be a strategic advantage or a weight around your ankles when treading water. Take a proactive stance to take charge of your inventory and planning processes. If you are a distributor or manufacturer, there is nothing more fundamental to success. If you’d like to talk about your inventory strategy, email me.