Strategy + Structure = Success

Does your organization need to overhaul their inventory system?

Laura Retzler

This is the last article of a four part series to describe the four main pillars that successful businesses should focus on to improve profit, growth and become more efficient.

This topic describes Inventory (or services).  The norm is that every organization will generally sell or build items and in doing so will create a part number to distinguish one item from another.  Purchased items and sometimes services also have a part number assigned to distinguish these items as well.

It is critical for organizations to ensure that the right inventory or the appropriate parts are available when they are required.  Every single item procured has some form of inventory management requirement.  For instance take the paper cups for the coffee: informally an individual from the organization will complete a visual review of the stock level of the remaining cups to ensure there are enough left or need to place an order for them.

For manufacturing and distribution companies it is critical to keep the right inventory at the right time, otherwise obsolescence or shortages will occur. Without the right inventory customers will be lost or become unhappy with the services provided. For services companies the right resource must be available at the right time, however resources should not be idle for large periods otherwise the overhead of the resource will erode the profitability.

Specifically for automotive manufacturers shutting down an automotive line can cost thousands of dollars per minute, and the “Big Three” specifically will charge suppliers for this cost if the fault is that of the supplier. This kind of snafu can put an automotive supplier out of business overnight.

Many companies tend to create a multitude of part numbers, but then neglect to update the information such as lead time; min/max levels; approved suppliers; and validate optimum inventory levels.  Without a regular validation that the right parts are valid, active, and regularly consumed, companies can quickly lose their strategic position in their respective markets.

What are your organizations inventory turns? When is the last time active part numbers were reviewed and updated at your organization?

Thanks for reading

Laura Retzler, Principal Management Consultant
4Pillars Consulting Services
806 Telephone Road, RR1| Grafton, ON K0K 2G0
Office: (519) 841-5058|

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