Last week I received a phone call from the owner of a distribution company who said he was “desperate” to improve his inventory performance. In a lengthy phone conversation, we discussed his company’s primary inventory challenges:
• The quantities of products in his computer system did not agree with what was actually in his warehouses
• His company was suffering from continual stock-outs of popular products
• His warehouses were filled to capacity with dead stock and large quantities of slow moving items
We outlined a step-by-step plan to correct these problems. The owner said he would present the plan to his managers and get back to me so we could agree on some incremental goals and develop a time line for completion.
The owner called back the next day. He sounded dejected as he explained that while his managers agreed with the plan they felt that they needed to “get organized” before they could start the project. However, after more questioning, I found that the company had no definition of what “getting organized” involved. That is, there were no plans in place to review or improve basic procedures within their organization. This distributor reminded me of an overweight person who always says, “I really need to get in shape” without plans or a commitment to improve his or her situation.
As we start 2015, I would suggest your organization put plans into place to improve its inventory situation:
1. Ask your executive team where improvement is necessary. For example:
• Are the on-hand quantities accurate in your computer system?
• How accurate are your future forecasts of product demand?
• Is customer service suffering do to a high level of stockouts?
• Is dead stock and excess inventory cluttering your warehouses?
• Do your warehouse workers waste time searching for misplaced material?
• Have specific inventory-related goals been established for 2015?
2. Identify your critical issue(s) for improvement.
3. Within each issue, examine the functions in your organization that affect that issue: Are policies and procedures in place? Are they enforced? Do they need improvement?
4. Develop and agree upon a step-by-step plan to address each of these challenges. This plan will include the name of specific individuals who are responsible for each activity.
5. Establish a realistic time line for completion. And most importantly, schedule periodic meetings with your entire management team to review the plan and monitor your progress.
Now, all the basic procedures within your organization will be functioning optimally. Then, any new plans to improve areas listed in #1 above will pass or fail on their own merit, and not because underlying procedures are failing.
(Guidelines for Inventory Policies and Procedures Manual can be found in Appendix C of Jon’s book Achieving Effective Inventory Management, 5th ed. Use the resources on our web site (www.EffectiveInventory.com) in developing your action plan and goals. If you have a specific question send us an email ([email protected]) or ask us about our inventory analysis and consulting services.
This year you can join the thousands of organizations that have achieved effective inventory management!