3 Reasons you have Obsolete Inventory

When I managed warehouses, my goal was to manage my operations in a Proactive manner instead of being Reactive.  Doing so allowed me to develop processes & procedures to address issues before they became major ordeals.  This was especially true when it came to the daily challenges of managing inventory.  One challenge all companies must face is how to minimize and hopefully avoid obsolete inventory.  Unfortunately, many companies consistently practice the “art” of reacting to every problem that comes their way but they rarely investigate what is causing their pain. 

This is the approach that most companies take with respect to spare parts obsolescence. They don’t manage their spare parts inventory to prevent the accumulation of excessive quantities of obsolete parts and then when this becomes an issue they expect that they can suddenly do something to make all the obsolete parts go away.  

Obsolete inventory doesn’t just appear on the shelves, we put it there. Maybe with initial good intent but minimizing obsolete inventory requires attention to detail and ongoing management. 

Here are just 3 reasons that cause obsolete inventory: 

1. OVER PURCHASING:  Someone on your team bought WAY too much product to start with and now it just sits on the shelf.  Most often this is done by mistake but I still see instances where “inventory managers &/or “purchasing managers” will buy months worth of product “so they don’t run out” or just to keep from placing an order later on.  They think it saves them time.  Believe me, there is absolutely no savings taking place.  

2. OPERATIONAL CHANGES:  Change is going to happen whether we like it or not.  However, wouldn’t it be nice to know about some changes before hand?  In the world of manufacturing, old equipment is phased out and replaced, but what happens with the current inventory of spares for that equipment?   

3. NO REVIEW OF INVENTORY USAGE:  Change once again affects your inventory, this time on a daily basis.  The usage levels of items can & will fluctuate throughout the year. When no one takes the time to review the usage history of items before reordering, then you better start looking for a larger warehouse because you will need it.

By working PROACTIVELY with your team to address these issues, policies & procedures can be designed to greatly reduce and in some cases eliminate the amount of obsolescence within your organization. 

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As an Inventory & Operations Consultant, my mission is to help you find the “LOST” cash in your warehouse.  I accomplish this by developing customized solutions that will make businesses more organized, productive and therefore more profitable.

I always offer a FREE 1 hour consultation but now I’m offering a FREE Audit on your Inventory Management Process.  This $500 value allows you and your team to assess my services at absolutely NO RISK to you. 

 For more information on my services, please visit my website, www.jitsolutionsgroup.com or visit my LinkedIn profile: www.linkedin.com/in/inventoryjoe/. 

Visit & subscribe to my Blog: http://jitsolutionsgroup.blogspot.com/

for additional tips, techniques as well as other useful information

Inventory=Cash, so treat them as equals

If you own or manage a business that manufacturers a product, distributes components to others, provides repairs services, a retail business and numerous other types of businesses, you realize that inventory can be a huge factor on your bottom line.  I mentioned this because I constantly encounter situations where these owners/managers treat their inventory as if it’s only “stuff” that takes up space on their shelves or in their warehouse.

That is the WRONG way of thinking about inventory. You need to think of and treat your inventory as cash, because that is exactly what it is, CASH.

You wouldn’t leave piles of cash lying around on a shelf because if you did, it wouldn’t lie around long, now would it?  So what should you do, begin implementing inventory control measures, designed to protect your Cash.

Here are 3 simple steps that I encourage every client to enact as soon as possible:

*Eliminate the Yearly Inventory and move to Cycle Counting, it’s more accurate and you are able to react and resolve issues sooner.

*Lock down your warehouse/storeroom because if everyone within the company has access to your inventory, how controlled is it.  Do you want everyone to have access to your wallet?

*When inventory does leave the warehouse know who received it and why.

There are obviously more controls measures that a company can and in most cases should implement.  However, when you need to make some quick changes you can’t go wrong with the 3 suggestions mentioned above.

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As an Inventory & Operations Consultant, my mission is to help you find the “LOST” cash in your warehouse.  I accomplish this by developing customized solutions that will make businesses more organized, productive and therefore more profitable.

I always offer a FREE 1 hour consultation but now I’m offering a FREE Audit on your Inventory Management Process.  This $500 value allows you and your team to assess my services at absolutely NO RISK to you.

 

For more information on my services, please visit my website, www.jitsolutionsgroup.com or visit my LinkedIn profile: www.linkedin.com/in/inventoryjoe/.

 

Visit & subscribe to my Blog: http://jitsolutionsgroup.blogspot.com/

for additional tips, techniques as well as other useful information.

 

Common Inventory Management Problems- PART 2

A successful business relies on many factors, one of which is a reliable inventory management system. Inventory management consists of everything from accurate record-keeping to shipping and receiving of products. Inventory management that is properly maintained can keep a company’s supply chain running smoothly and efficiently. However, there are many common inventory management problems that can occur.

Inventory management problems can interfere with a company’s profits and customer service. They can cost a business more money and can lead to an excess of inventory overstock that is difficult to move. Most of these problems are usually due to poor inventory processes and out-of-date systems.

There are a number of problems that can cause havoc with inventory management. Some happen more frequently than others. Here are some of the more common problems with inventory systems.

7.     Too much distressed stock in inventory. Distressed stock is products or materials in inventory that has or will soon pass the point where it can be sold at the normal price before it expires. This happens all the time in grocery stores. As a particular food product nears its expiration date, the business will discount the item in order to move it quickly before it expires.

8.    Excessive inventory in stock and unable to move it quickly enough. This is probably the most common problem for most businesses. Cash-flow comes from moving inventory. If a company buys an amount of product for their inventory and they do not move it, the company ends up losing money.

 9.      Computer assessment of inventory items for sale is inaccurate. Nothing is more frustrating than going to a business that says it has a product but it turns out that they do not. The quantities are off and the actual items are not available. Too many people assume that the computer records are infallible. But the records have to be entered by a person and if the person responsible does not keep accurate records, it can turn into a real headache. Inaccurate inventory records can easily result in loss of money and strained customer service.

 10. Computer inventory systems are too complicated. There are many inventory software programs available for business use. The problem is that many of these programs are not user-friendly. Computer software developers do not take into account that most of the people who will actually be using these systems are not tech savvy. A company does not always have the time and money to invest in training of personnel to use software effectively.

11.  Items in-stock are misplaced. Even if the computer accurately shows the item as in stock, it may have been misplaced somewhere at the warehouse, or in the wrong location within a store. This can lead to a decrease in profits due to lost sales and higher inventory costs because the item must be re-ordered. Plus, the company must spend the time for employees to track down the misplaced item.

12.  Not keeping up with the rising price of raw materials. This falls more into the accounting end of inventory management. By not keeping current with the rising price of raw materials, a company will lose profits because they are not adjusting the price of their finished products. Finished items in inventory must be relative to the cost of raw goods.

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Thanks for reading and please look for future articles that will provide tips and best practices designed to help you and your team manage your inventory. 

As an Inventory & Operations Consultant, my mission is to help you find the “LOST” cash in your warehouse.  I accomplish this by developing customized solutions that will make businesses more organized, productive and therefore more profitable.

I always offer a FREE 1 hour consultation but now I’m offering a FREE Audit on your Inventory Management Process.  This $500 value allows you and your team to assess my services at absolutely NO RISK to you.

 

For more information on my services, please visit my website, www.jitsolutionsgroup.com or visit my LinkedIn profile: www.linkedin.com/in/inventoryjoe/.

 

Visit & subscribe to my Blog: http://jitsolutionsgroup.blogspot.com/

for additional tips, techniques as well as other useful information.