Checklist for good inventory management and more effective working capital management:
- Do you regularly analyse inventory?
- How many products are in stock for more than 3 months?
- Which articles and suppliers determine 80% of the inventory?
- Do the inventories in the warehouse correspond with your administration?
- Are you analysing your inventories frequently enough? Are you short of time to look at all the articles on a daily basis? Then prioritise!
- Is the data in your system in order? Frequency, delivery times, order quantities, minimum stock levels and service levels.
- Does it take a while before purchase recommendations have been processed into purchase orders?
- Is the phasing in and out of products organised?
- Does the stock manager have current information about backorders, shortages that are to be expected, and the delivery performance of suppliers?
- Do you have insight into the inventory in all your warehouses? Often, there is ‘sufficient’ stock, however, not in the right place.
Check, act, and (re)planning of items often happens too late, far too late. As a result, the planning cycle is not concluded. You must be able to adjust when a suppliers delivers late, when there is a production problem, when the customer demand exceeds expectations, or when a new products sells faster than expected.
Unfortunately many logisticians find the daily ‘drivel’ annoying. This should not be improved by making quick, ill-informed decisions, but by coming up with smart solutions, by really getting into the details, by delegating and motivating in a right way, and, especially, by measuring and controlling continuously. If you don’t do this, inventory becomes off balance and the share of inventory that really adds to the service level will decrease. Ultimately, poor working capital management can often mean business wrongly invest far too much money into the wrong stock.