Incidence, who is actually responsible?
"Sales expected a lot from it, but it turned out to be nothing."
"Yes, but too much was ordered then."
"But that one customer would take it away?"
"Who actually came up with those ridiculous forecasts?"
"Maybe we just have to wait a while, but we will walk."
"Hey, it can't just go back to the supplier ..."
The subject that nobody wants: obsolete stocks. It's like a visit to the dentist. You realize that a dental visit is necessary to keep your teeth healthy, but you are not exactly looking forward to it.
Where is the problem? Three causes:
There are three reasons for the uncertainty surrounding the responsibility of obsolescence:
1. Many different departments and people are involved in stock choices
2. The causes are often diverse and complex
3. It is simply not a fun subject
Re 1. Many involved
An order picker is responsible for the number of order lines it picks up. Clear for everyone. But many different parties are involved in inventory creation, such as sales, marketing, purchasing, inventory management, item management, and logistics. The more involved, the easier it is to hide and avoid your responsibility. If you do not organize this, then any argument to make someone responsible is refuted by someone else:
- The seller said it would be a success
- Seller: "Yes, but then marketing must introduce it properly ..."
- The buyer provided 10,000 items as a forecast
- The Buyer: "That's right, but that does not mean that stock management must immediately deposit 2,500 ..."
- The supplier would do a major campaign
- The Supplier: "Yes, but you could not yet deliver the goods when we had already started ..."
- Marketing had prepared an extensive introduction
- Marketing: "Right, but article management had not put a good image in the system yet ..."
Re 2. Complexity
In addition to a large number of people involved, the causes of obsolescence are quite diverse. During the entire life cycle of a product, choices are made from different, often conflicting interests. And our multifocal * distribution structures do not make the process any easier.
* a new term within logistics that indicates the transition from traditional to modern distribution structures, such as bulk deliveries to warehouses on industrial sites (far) to parcel shipments to private individuals (close by).
Re 3. Not nice
People prefer to put their energy into fun subjects than to problems where little honor can be achieved. Better chances than challenges, better profit than loss, a better score than defend and prefer a new, fresh product than an old, obsolete article.
Definition of obsolescence
The solution starts with getting agreement on the definition. When do we call a product or assortment exactly obsolete? Often there is the talk of obsolete stock, while in reality there is just too much stock. In that case, a product can still best meet the inventory criteria, which means that a place in the warehouse is just legitimate.
The final definition is specific to each company. You decide for yourself what you think is acceptable or not, depending on your market, customers, policy, and resources. For example, if you are a wholesaler who claims to have the widest range, you will be less likely to say goodbye to a slow mover. But when you have limited capital and limited warehouse space, you are forced to make stricter choices. Therefore, do not apply general guidelines, but pay sufficient attention to your definition of obsolescence. Topics that can be dealt with include issues such as start date, number of customers, development of sales and maximum stock levels in weeks, money or volume.
On the basis of such criteria you can determine your specific definition, for example: with us a product is out of order when it has been in stock for at least 6 months, fewer than 3 customers have been there before, the sales in the last 3 months were lower than the 3 months before and the current stock is more than 15 weeks, € 10,000 or 1 pallet place.
Once you have defined a clear definition, you can run periodic reports and add nice pivot tables.
Who is responsible
As indicated, many people are harmed when creating an inventory and when creating obsolescence. But only one simple question is needed to find the right responsible person: who took the initiative to put the product in stock? As soon as you answer this question, you have appointed the responsibility. The person responsible for the birth of a product is also responsible for the funeral!
The number of people in charge is manageable. These are the most common:
- Buyer: at the initiative of himself or of the supplier
- Category Manager: at the initiative of himself or of the market
- Seller: at the initiative of the customer
- Management: based on policy and vision
How do you organize this?
As soon as every product (preferably in ERP) is connected to the initiator and therefore has an owner, the process can be started. You can prepare a report based on your definition of obsolescence. Of course, you add fine columns to the report, such as the supplier's name, brand, logistics data and order, and sales history. The more the better: everything is data. The owner then evaluates his own products and adds a promotion or comment. It helps to limit and standardize these. After that, it is crucial that the action is taken becomes stricter every time. In the first instance, you can still write down "communicate product in the newsletter", but in the end, you are forced to choose "write off and destroy". For example, you can name 10 possible steps that are becoming more concrete (and therefore more expensive). With each new reporting cycle, it is clear whether the previous action has had an effect and thus has received the product outside the obsolescence criteria. If not, you force yourself to go one step further. And don't forget, it is most cheap and efficient to simply sell a product that you have in stock! Returning to the supplier always costs money and margin. Moreover, many companies are not so good at this: is that pallet still there, it could already be returned half a year ago?
Complete the circle
If you want to do it all right, then you also ensure that the consequences of obsolescence end up with the right person: with the initiator. So if a seller wants to put a customer-specific product in stock, then future obsolescence also comes at the expense of his or her personal targets on turnover and margin. Sales would, therefore, be wise to have the customer sign for specific items and immediately see their personal interest. Also with a buyer, the costs for obsolescence can be deducted from earned earnings: fair deal.
Involve your suppliers
The above is largely based on the internal organisation. But do not forget that a supplier also has every interest in a vital, well-functioning range. Of course, you can easily make your supplier co-responsible. It starts with saying this: "Dear supplier, you want us as a customer to grow, put new items in stock and make sufficient returns. A successful assortment is decisive in this and we will do that together. I expect a periodic report from you in which you compare our figures with the market and other customers and advise on what needs to change. And I would like to set a goal together for maximum obsolescence in the number of products and money. In addition to advice, you can help me with lower inventories, returns and sharing in costs. Moreover, I don't feel like stepping up new products if there is still too much old stuff. " To properly organize this process, it is useful to structurally assess your suppliers. Nowadays, simple, affordable software is available that will make this operational within a few days.
Finally, a bad metaphor
Compare it to the birth of a person. The parents have a child (consciously or unconsciously). You are therefore responsible for your child. Not only for birth, but also for education, development, and funeral. Fortunately, there is also a difference in this bad metaphor. Our children usually survive their parents, saving us from the funeral. Unfortunately, this is not the case with many products. Hmmm, maybe we should think about how we can extend the life of products ...
-source: Robert Driessen-