Early in my career and at various stops along the way, organizations did not even discuss inventory levels. Order Fulfillment has always been widely known. Excess Inventory Sales percentage has also generally been known, but it's shocking how often this isn't even a known metric. A quick story about the lack of inventory awareness from a business I worked with previously:
Inventory was everywhere. Product in storage at over 20 different points of distribution. Most were 3PLs, however there were multiple departments in this company dedicated to tracking the inventory, booking the movements, managing the storage facilities, and auditing the accuracy and sustainability of inventory controls in each. All of the money tied up in storage fees and administration is astronomical in this situation, ignoring the cost to produce or purchase the product up front. Their inventory focus of this company was on two things: reducing how much money gets lost on excess inventory sales/donations and reducing DC-to-DC transfers. Nowhere did they even report on the warehouse utilization of each facility to see if a few could be eliminated!
This company was not rare. More companies than not see the problems associated with lagging costs, however don't have the right processes, KPIs, systems, training, and structure to attack the leading indicators. These are symptoms of the disease, not the disease itself.
Velocity Advisors LLC is here to help. There are more ways to attack inventory reduction than we will highlight in this series, however this series will break inventory down into the diseases throughout the supply chain we're Bandaiding with inventory to maintain service levels. Over the next few posts, we will discuss:
(1) Apathetic Culture
(2) Forecast Error and Demand Variability
(3) Reliability of the Supply Chain
(4) Lead Times
(5) Capacity Constraints and Seasonality
We're going to start with cultural and go from there. Personally, we may be unhealthy because we don't attack what we eat or our activity levels head on. Our personal finances are a mess because we spend more than we make and don't have a budget. Where there's a will there's a way. Step 1 is self awareness, and your organizations carry too much inventory because you don't have visibility to the right symptoms and a culture of attacking them head on rather than just storing more product.
Let's work on it together. Velocity Advisors LLC is here to help create value in your company today!!