Are You Keeping Obsolete Inventory?

Many of us are "pack rats," meaning we have difficulty throwing things away, even when we know we'll probably never use them. Unfortunately, companies that do this may be wasting a great deal of money, because there are very real costs associated with carrying inventory. The more inventory a company holds, the higher these ongoing costs will be, which is reason enough not to carry outdated, or obsolete, inventory.

Let's look at a few costs associated with carrying all types of inventory.

Labor: Time must be spent performing all of the activities required to stock parts, including putting stock away, picking, counting and relocating. The larger the inventory, the greater the number of transactions and the greater the number of people involved. There is also "support" labor required for all of the clerical tasks associated with managing inventory transactions. Any  labor spent on obsolete inventory is wasted.

Equipment: Equipment is required to load and unload stock as well as transport materials to their points of use. Typically, fork trucks, pallet trucks, tow motors and ladders are used for this purpose. In addition, you need racks and shelves for storage and possibly even pallets and skids for larger parts. Although you may not be transporting obsolete inventory very often, it is not uncommon to periodically relocate slow moving items.

Training: Although the training may be inexpensive, or in some cases free, employees taking time away from the job are real costs to any company.

Future Opportunity: All space used for storage is space that cannot be used for other purposes, such as a new product line, new machinery, expanded office space and more. Lack of available space for these purposes may cause a company to expand or relocate its facility unnecessarily.

The examples above are reason enough to eliminate obsolete inventory. There are many ways to address this, but the key is to develop some type of inventory obsolescence program, then stick to it.

Please watch for part 2 of this Post where I will review some ideas on how to eliminate obsolete inventory.

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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.

 

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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.

The 4 KEY components you need to manage inventory

All companies both large and small face the daily challenges managing the inventory for their Raw Materials, Spare Parts and Finished Goods.  Over the years, I’ve worked with several companies, most of which had me being the person responsible to managing inventory.  In that time I have identified 4 KEY components that will help any company overcome their challenges of managing inventory.

The 4 Key components are:

Policies

Procedures

People

Technology

All 4 must be in sync with one another in order for you to have a truly effective inventory management program.

Today I want to provide a brief overview of how these components can help your company become more organized, productive and profitable.

Policies/Procedures

A Companies Policies & Procedures drive their entire Inventory Management Program. Just like any other policy layout, this provides direction on how to receive and inspect product shipments, how the receiving paperwork is to be processed, by whom and when.  If the product is received incorrectly at the “back door” then the product(s) in question has the potential to be incorrect all thru the process of putting the product away, shipping and invoicing the item to a customer or in the case the item is used in-house, issued to a service person.  How discrepancies are handled.  This issue alone must be handled promptly. The longer it takes to notify a supplier about an issue, the less credible you become. 

A companies policy should also cover who is to remove product from is storage location. One major cause of inventory discrepancies is due to an uncontrolled warehouse/parts room.  A company can’t maintain control when everyone can help themselves to product.  One final area is a company’s policy/procedures on how and when to audit their inventory levels. 

When I begin working with a client, the first piece of information I want to know is their current inventory accuracy level. I want to see if they even know.  This will immediately tell me where we are starting from and how far we have to go.

People

A company can have a ton of policies and procedures but if they do not have the support staff in place or properly trained staff the program will fail.  Taking the time to properly train employees will provide you with the greatest ROI a company will see.  Training is not only for new hires but also for those who have been with the company for many years.  By training everyone, you are ensuring that all of your staff will be “on the same page”.  Once your manual has been created, make sure it is available to all to reference.  A printed copy should be available as well as an electronic copy, which is very beneficial for those companies with multiple sites.  Posting your manual on the company server and/or the Cloud will help keep everyone informed. 

These procedures should be audited yearly to determine where changes should be made or in some cases removed all together.

Technology

The technology available today can be extremely overwhelming to companies.  I often hear where companies say they can’t afford to implement any type of inventory system.  They are doing a quick analysis of what other companies are doing and they see price tags of $10,000 and immediately they determine they can’t afford any type of system.  However, if they would spend some time researching their options, they will find solid systems, anywhere from several hundred dollars up to $5,000.  This price range is very suitable for the clientele I work with.  Now, if these same clients can afford something in the range of $10,000, they can find industry specific programs that are pretty plug and play.

In other situations, I’ve seen companies that have some type of inventory management system in place, spent the $5- $10,000 BUT are not using the system.  They did not do their homework before purchasing it and now they can’t use it because they either bought software and/or hardware that will not work correctly for their particular situation or they simply do not have the time to fully implement it.

As with any form of technology, you shouldn’t get caught up in having the “latest and greatest” product.  You could end up buying features that you will NEVER use.

 

I truly hope this overview has been beneficial to you.  If you would like additional assistance with your specific challenges, please see the information below. 

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As an Inventory & Operations Consultant, my focus is helping companies overcome the daily challenges of maintaining inventory.  I accomplish this by developing customized solutions that will make your company more organized, productive and therefore more profitable.

 

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.