Why Is My Inventory Still Bloated? Part II
By Jon and Matt Schreibfeder
Occasionally, even after we set optimum replenishment parameters, a client may still find themselves
with a bloated inventory. The second common reason why this frustrating situation occurs is large
quantities of uncommitted non-stock products.
Any product that is not on a location’s approved stock list should be considered a non-stock product.
In this case:
- A customer must buy the entire quantity of the product that must be ordered from a vendor.
- If the customer will not accept delivery of the entire amount that must be ordered from a
vendor, the sales price should cover the entire cost of what must be purchased. That is, they
must pay for it all. Any material that is not delivered to the customer can disposed of or
retained as “zero value stock”.
- If the customer is not willing to buy or pay for the quantity of the product that must be
purchased from a vendor, the remaining quantity should be written off. Hopefully you make
enough profit in other transactions with the customer to make up for this loss.
The Net Available Quantity (On-Hand – Committed + On Replenishment Order) of a non-stock product
should always be zero or, if it has been written off, its On-Hand value should be zero.
Best practice is to produce a list of non-stock products with a positive Net Available Quantity value
each week. This report should be sorted in descending order based on the value of the Net Available
Quantity. Information for each listed item should include:
- Net Available Quantity
- Cost per Piece
- Net Available Quantity Value
It is the responsibility of the listed salesperson to persuade the customer to buy the remaining stock,
return it to the vendor or dispose of it in some other way.
In the 1950’s there was a science fiction movie called “The Blob”. The Blob was a big red thing that kept
growing and growing. By controlling your committed and non-stock inventory, you can help prevent
your inventory from resembling this out of control, bloated, monster.