inventory issuesAre you throwing profits away with your inventory?

Unfortunately too many businesses fall into some inventory management issues and they can have a lot of difficulty in resolving them.  These challenges can sneak up on a business slowly, or it can hit a company like a freight truck against a loading dock.  These challenges can eat away your profitability by slowing productivity, lowering quality levels, and damaging customer satisfaction.

Before your business suffers, review these top three inventory management issues to make sure you can overcome or prevent them from happening:

Non-standard data – integration and connectivity is the key to productivity and profitability in today’s world.  But the data is almost worthless if it is not standardized.  If one system or business references a purchase order number, while another system references a “PO” number, there could be some integration issues that would cause a communication breakdown and chain reaction throughout your supply chain. While a purchase order number might be too obvious to overlook, common issues occur with item numbers, reference tables or supplier identifiers that could slip through cracks in your data integrity. A case study involving Overstock.comdemonstrates how improving customer data quality alone has improved the company’s logistical and customer care expenses by as much as $1 million.  It is important to review all systems and the data that is contained to make sure you are making the most out of your integration efforts.

Too many spreadsheets – relying on spreadsheets for critical business data is one of the worst mistakes for business managers.  Your ERP, procurement, and other supply chain systems should have robust reporting tools available that will output reports that are highly reliable and can help you make the right decisions.  While spreadsheets are good on occasion, using too many means that you might have inconsistent data or inaccurate data.

Inappropriate demand planning or procurement planning processes – businesses have multiple options for demand or procurement planning.  Often businesses elect to keep the same old strategies that have been in place for decades.  This may not be the best solution in today’s supply chain.  One horrifying example is the infamous “Green Volvo” story where green colored Volvos were not selling so the company drastically reduced the price to move inventory.  This was not communicated throughout the supply chain, thus manufacturing began churning out more green Volvos based on their downstream demand.  The wrong demand planning process can cause inventory overages or shortages which can result in lost sales opportunities or lost profits.  Incorrect procurement planning can not only affect inventory on your shelves but it can also impact your shipping and distribution costs.  The correct planning systems can make sure your transportation costs are optimized while making sure your inventory is right-sized to meet your business needs.

Your inventory can be one of your most expensive lines on your P&L statement.  Inventory management issues can be overcome or prevented with an assessment of your current needs and an objective review of your options.  Contact TMG for ways to manage inventory issues and keep your business goals within reach.

6 Responses to Top 3 Inventory Management Challenges
  1. Connecting demand planning to an accurate forecast would be a good place to start for many organizations. I have used a prediction market to forecast demand for hospital services to 99.7% accuracy. How much would that contribute to supply chain efficiency?

  2. I strongly agree that integrated ERP solutions are much better than independent spreadsheets.
    I really enjoy your Volvo example demonstrating lack of collaboration and communication! @BillKonopacz

  3. David, which prediction market did you use? Clearly 99.7% shows your system is working.

  4. Bill,

    I thought the Volvo story was interesting as well. I think we all have similar stories to share; it’s just that with automobiles, the mistakes are more expensive.

  5. Don,
    Thanks for your follow-up comment. The system or application is less important than the design that goes into creating and executing the prediction market. There are a number of principles that are important, and I can offer advice on the practical steps needed to turn those principles into reality. Please feel to get in touch (drajakovich@prometheusprocurement.com) if you would like to discuss how to create an accurate forecast and how that forecast can be used to improve your supply chain.

  6. I am interested to get the emails on all different topics of SCM


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