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Managing Your Company's Inventory

(August 2008) posted on Mon Aug 11, 2008

Reaping the benefits that follow a sound inventory system.

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By Marty McGhie

Systems versus levels
So what’s the answer to managing your shop’s inventory? While I’ve touched on perhaps the two extremes of inventory levels, the answer doesn’t really lie in a discussion of "levels," but rather in "systems." In other words, once you’re able to implement a successful inventory system to manage your materials, the proper inventory amount will fall into place, creating an efficient balance between necessary inventory amounts to accommodate production-and minimizing the amount of cash necessary to do so.

For many years, our company managed its inventory levels from a manual, Excel-based system, something that certainly can be done if proper inventory procedures are followed. But the higher that sales grow, the more complicated inventory becomes to manage.

In years past, our solution was to simply buy and stock higher volumes of the materials we were regularly running out of-hardly a scientific approach. And then, one day, we woke up and realized the inventory amount on our balance sheet was enormous. At that point, we began to apply some sound inventory-management principles. What follows are a few standard practices that we’ve implemented and that your shop should be able to use as well:

* Put someone in charge: One of my favorite management principles also applies to inventory: "If everyone is in charge, no one is in charge!" While inventory management requires a joint effort from multiple people and departments in your business (purchasing, accounting, production, scheduling, etc.), there has to be one person responsible for daily, weekly, and monthly inventory control. It is that person’s job to make sure the systems are being followed and that inventory levels are adequate and in line with future needs.