If you haven't been worrying about inventories -
now might be a good time to start.

Opinions differ as to how long and deep the global slowdown might be. The combination of a battered banking system and shell-shocked consumers heavily in dept suggests it could be hard for many businesses, whatever the duration. Getting hold of cash to secure liquidity in times like these is testing the skills of managers to the limit so any way to untie cash from day-to-day operations has to be good news.

Whatever the type of business, stockholdings should be one of the first areas to be looked at in detail, especially the stock and efficiency of a parts operation. Computerised inventory control systems can put a huge strain on company finances if not periodically reviewed and can be disastrous when coupled with poor stock management. 

Staff often need help in analysing stock and in fine-tuning re-order parameters. Quite often they simply do not understanding what the inventory control system is really doing to the stockholding - and how the situation could be permanently improved. Quite often the reordering parameters set into the computer system when first installed cease to be relevant once the system has settled down.

Whether a company specifies dead stock as being no sales for six months or no sales for a year you can be sure that far too many companies will have dead stock in excess of 25% of their total stock holding. Many managers will dispute this but many managers never ask what the level is and on what basis - and no parts manager is going to rush to tell them unless it is very low. If you think of the stock as being a big pond and the dead stock as being the stagnant water you may get a better picture of what is happening. As the area of stagnant water gets bigger the flow of fresh water has to get faster or the pond has to be enlarged.

Many managers feel that because it's dead stock by definition you are stuck with it and the only way to get rid of it is to dump it. Partly true, but there is always a customer somewhere - you just haven't found them yet! See the article on Advertising

Inflated inventory valuations may have seemed a good thing in good times, but right now if your overdraft or loan is secured against fictitious assets, how much better to know it before your bank tells you. 

Letting a service department dictate inventory levels with a view to achieving 100% availability without regard to profitability is a recipe for disaster. Many MD's or CEO's have sales or financial backgrounds and very little inventory-specific training.

Besides releasing cash, businesses may be thinking about relocating, and so need to cleanse the stock before moving to optimise space, racking and efficiency. Why allocate new space, new racking to dead stock and then pay staff and carriers for moving it?

David Bates has spent much of his working life managing inventory control systems. 
He has saved money for very big and very small companies, without detriment to service levels or efficiency. He has worked throughout the world with Rolls Royce, Saab and Alfa Romeo, and with their dealers. He has done similar work for the NHS, and has been an advisor to small and medium businesses for Business Link in Somerset.
David would be happy to have an informal talk on the phone with any company to see if he can help.
Tel: 01458 253098 - 07973 905606
enquire@dfbassoc.co.uk