The Right Person in the Right Position
By Jon and Matt Schreibfeder
When we start to work with a new client, we often observe “inventory anarchy”. Common problems include:
- Stockouts of critical items that customers always expect to be available for immediate delivery.
- Excess inventory of other stocked products.
- “Dead” inventory that hasn’t had sales or use in years.
- Material that was purchased at a cost that didn’t maximize profitability.
These problems lead to disappointed customers and lost profits. The blame for this situation is often placed on the “inventory person” or “inventory people”. The folks that are supposed to be sure that you have the right quantity, of the right item, in the right location, at the right time.
But few individuals have all of the skills, as well as the necessary time, to consistently accomplish this goal. You must realize that different inventory planning, forecasting and replenishment tasks require different skills. A company that achieves the goal of effective inventory management often assigns a team to ensure that you meet or exceed your customers’ expectations of product availability while maximizing your net profits. Each member must possess specific skills. Except for the buyer/planner role, these are not usually full-time jobs and the people assigned to them can perform other tasks within your organization.
Marketing/Sales Management – Successful people in this role tend to be creative but also understand your customers’ and potential customers’ needs and desires. Responsibilities include:
- Decide what products should be stocked in each location.
- Determine the initial forecasts and stock levels for new products.
- Specify customer service level goals. That is, specify the company’s tolerance for stockouts for specific items or product lines.
- Provide collaborative information such as anticipated promotion sales or anticipated increases or decreases in sales/usage.
- Specify display or “show stock” in retail locations. These will be incorporated into “safety stock” quantities calculated by buyers or planners.
- Review slow moving items to determine what should remain stocked products and what should be discontinued.
- Review unusual high and low usage to determine if it was actual unusual activity or is the start of a new trend.
Purchasing Agents – A good purchasing agent should excel at negotiation and understand the “big picture” issues of the supply chain. Often key salespeople excel in this role. Responsibilities include:
- Negotiate buying terms with vendors.
- Conduct vendor performance reviews.
Buyers/Inventory Planners – Success in this role requires someone who loves to work with numbers and enjoys detail work and analysis. Responsibilities include:
- Have a complete understanding of all inventory replenishment tools utilized by the company.
- Forecast future demand of products.
- Maintain vendor lead times.
- Prepare reports of issues the purchasing agent must review with vendors.
- Set safety stock quantities to achieve the desired level of customer service.
- Determine optimal order/review cycles. That is, the frequency of placing replenishment orders with each vendor.
- Analyze whether the company should take advantage of any special vendor offers and present findings to Marketing/Sales and Corporate Management.
- Identify and review unusual sales/usage with Marketing/Sales Management.
- Make corrections to usage history and other inventory parameters as necessary.
- Monitor accuracy of provided collaborative forecast information and report back results to the source of information.
- Determine economic order quantities of each product. That is, the quantities that minimize the total cost of inventory.
- Issue purchase/transfer/work orders to replenish inventory.
- Expedite incoming orders as necessary.
- Maintain the inventory database.
- Produce inventory analysis reports each month to be reviewed by management.
Purchasing Manager – This role requires an expert administrator who is also a leader. They must completely understand the jobs of purchasing agent and buyer/planner. They must work with all individuals who work for them to successfully perform the tasks assigned to them.
- All purchasing agents and buyers/planners report to the purchasing manager.
- Set goals and objectives for each purchasing agent and buyer.
- Reviews performance of each purchasing agent and buyer on a regular basis.
- Usually reports to the Director of Operations.
Having the right people in each position will help your company achieve effective inventory management. The result will be happy customers, employees, and management.