Quit shrinking your profits when you don’t have to!
Are you growing inventory to meet the increasing sales demand? Don’t diminish your profit growth by losing inventory along the way. Remember, loss of inventory directly affects your bottom line! There is nothing more embarrassing then telling your customer you have the product only to find out that your quantity on hand is wrong. You lost the sale, looked unreliable in front of the customer and reduced your profits; all because your inventory controls were inadequate.
“Shrink” can be minimized and controlled through effective procedures and follow up. When I started learning how to manage inventory it was a paper and pen exercise. Microfiche was high tech in those days. Fortunately, the inventory systems improved and we were expected to maintain a very low shrink, usually 1% or less. Even with the best systems in the world, you still must have a culture of inventory management to truly drive sales and profits.
If your organization is struggling with inventory issues here are a four proven inventory concepts to consider:
Emphasis. What’s your culture? Do you have the proper emphasis on inventory? Be honest with yourself - does the entire team help control inventory from supply chain through the sales process, or is it one of those duties that no one really wants to take ownership of? Effective inventory management is by nature designed to support sales. Does everyone in your organization believe that or is it “the warehouse guys responsibility”?
Training! Can your entire team define what shrink is? If the team understands that good inventory control leads to increased sales performance and profits, they will take a more active role. Companies train for HR, Sales, Safety, but rarely for inventory management.
Cycle counts versus annual inventory. How are you counting and how often? If your team thinks that your annual inventory is the time to “fix” the discrepancies, something is wrong! Routine and regular counts to correct and maintain accuracy will help to avoid that year end surprise. Some organizations do such a good job maintaining accuracy with cycle counts that they never dread end of year inventory. They have confidence in their daily monitoring and counting and can actually use the stated inventory number off the ledger.
Accountability. It’s not the “System” you are using! It’s the execution of the system. Yes you might need new software, yes you might need to change some procedure, but executing and performing due diligence with what tools you have is c ritical to your business. Accountability is the key. The inventory was there! Where did it go? Don’t accept the non-answer on your precious inventory dollars!
Not everyone has the desire or understanding to keep inventory coordinated. I have been involved first hand with hundreds of year end inventories. As a district manager in the parts business, I would do as many as 30 entire store counts per year; not to mention the routine cycle counts and daily routines to complete.
If you want to discuss theory on supply chain and inventory control, I am sure there is someone out there that can show you their MBA and then hand you an invoice. If you want someone that is a proven practitioner on how to reduce shrink, build a culture of inventory management within your team, call Davis Profit Consulting.
You don’t have to settle for the year end surprise!