| Do you put stock in the idea of better Inventory Management? While technology plays an important role in inventory management, it can never replace an informed judgment. Too often, companies rely on information systems that were designed without consideration of the knowledge necessary for making an inventory decision about a particular product purchase. Successfully managing inventory involves three key steps. 1. Determine what information should drive a purchasing decision- inventory tracking analysis utilizing a consistently updated database is at the heart of this. 2. Make sure that the information is consistently and accurately provided at all points of decision making. 3. Make certain that the personnel making the purchasing decisions understand how to use the information to make decisions that achieve the goals that have been defined. Establishing clear and effective purchasing guidelines and controls accomplishes this. Once purchasing controls are in place, the inventory control system which tracks and maintains existing inventory needs to function properly and consistently. Stock availability information needs to be visible and reliable for the sales force to be effective and to enable the proper purchasing decisions outlined above. With good purchasing decisions, and accurate inventory control, ongoing sales should achieve a natural reduction in inventory. However, further steps can be taken to reduce inventories more aggressively, including just-in-time programs and proactive excess inventory reduction plans. Our extensive experience in inventory management comes from crisis beginnings. We took over management of a company with disastrously excessive inventory levels and with over forty percent of the on-hand inventory in excess of five years old. In the following five years our sales grew by fifty percent, but, as the graph below illustrates, we nonetheless were able to make tremendous reductions in inventory. |
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