It doesn’t matter if you are big business, small business, an institution or you are the person that everyone comes to for office supplies the result is the same. When it comes to inventory, someone has to pay for it and that means spending. Inventory is money! It is not a widget, a yellow pad or a Chrysler Minivan, its cold hard cash. Truth is, when we have more of one thing than we can sell, distribute or consume in a reasonable time its money that we could have used far more effectively somewhere else. You can call it velocity, inventory turn or whatever as long as the commitment is to shorten the amount of time that material is tying up your revenue. Do not worry about supply. Both supply and pricing are stable and adequate in this economy.
3 Basic Inventory Buying Controls
Know what you have! It is extremely important that you have a firm grip on what material you have in stock today and the accuracy of the Inventory information.
Know your lead times! Some of you with simple requirements can resupply in hours, some of you not so fast. Lead times negatively influence your internal supply and the tracking and monitoring of lead times will positively affect stocking value by reducing inventory and freeing up capitol.
Know your velocity! If you know your lead times, you can control your inventory velocity. If you know your velocity, you can re-evaluate and provide corrective changes in your minimum and maximum inventory values.
To summarize, if you can control your minimum and maximum inventory values you can regularly adjust your re-order points. If you can control your re-order points you can increase your warehouse turns. If you can increase your warehouse turns you can control your spending and align it to the service levels required by your internal or external customers. If you can provide a continuous level of service to your customer, you will positively affect your spending and profit. That! Is the value of good buying habits!
Content submitted by: Will Daniel, COO IntelliTrack, Inc.