Dead and Buried Inventory

July 21, 2009

“99% of the small and medium sized distributors in North America have no tools to identify dead stock.”

“As much as 40% of the inventory in the average warehouse is dead stock. It’s costing them money just being there.”

That’s according to Bill, who’s worked in industrial distribution for decades, and determined this a few years ago when he was president of a group of distributors. Chatting with him yesterday, I was quite surprised by the strength of his assertions, and even more so by the information with which he backed them up. Bill tells me that he’s seen the impact of identifying and dealing with dead stock first hand. His company was able to put several hundred thousand dollars into the bank almost overnight, with  ongoing savings in overheads thereafter.

Bill says that people confuse slow moving inventory with dead stock. While there is some overlap, he says, there’s a huge difference. For example, you may have a product that doesn’t move for 5 or 6 months, but when you do receive an order, the value it adds to the bottom line justifies the carrying costs. Compare that with the product that turns over several times a year, but contributes very little to the bottom line. In many cases the clues to identifying dead stock are buried quite deep.

My curiosity is piqued. I’ll be investigating over the next few weeks and will post regular updates.

Vultures On-Line

July 15, 2009

LinkedIn has become one of the premier on-line business networking forums. I’ve found it useful in various ways professionally. I’ve recruited good staff by posting a job offer on LinkedIn. There have been interesting cross-referrals and opportunities to e-meet new people. I’ve actually enjoyed some very positive experiences directly as a result.

And then there are the Questions and Answers.

Sounds like a brilliant idea – a huge business network at your disposal. You have a question – post it on LinkedIn, and a wealth of expert advice will be at your disposal. Sadly, here’s where the distinction between humans and vultures sometimes begins to blur. I try, at least twice a week, to see if there are any questions in my fields of expertise to which I can add some value by supplying a useful answer, based on my knowledge and experience. At no point have I tried to use this as a “selling” opportunity. And there are many, many people on LinkedIn who do the same, far more effectively and prolifically than I could ever manage.

However, there are so many questions that result in a flurry of sales responses. If you’re the person who recently asked a question about a manufacturing process, your question had 17 responses when I last looked. Fourteen of them were from vendors of anything from ERP software to machine repair services, trying to sell to you. The 3 meaningful answers were buried amongst these, quite possibly never to be read by you.

This parallels my own (admittedly limited) experience with traditional business networks in the past. Most people seemed to be there with one mission in mind: find someone to pounce on with your sales pitch. There was no give and take. That’s so different from the many technology (and other) on-line forums I belong to, where for the most part people seem happy to simply impart their advice or knowledge, and to keep quiet if they don’t have anything of value to add. And ironically, my suspicion is that this ultimately attracts more business than the blunt force approach.

I still like LinkedIn, and will continue trying to answer questions where (a) I can add value and (b) I can get in ahead of the vultures. But I’m not planning on posing any question of my own there – I’ll keep those for the specialty forums.

Show Me The Money

July 7, 2009

I’ve lost count of the number of times I’ve read or heard that this (a recession) is the best time to spend money on (…fill in the blank…). And you can guess who’s saying it. It doesn’t mean that they’re necessarily wrong, just that there might perhaps <cough> be just a wee bit of bias involved.

There’s just one problem with asking people to spend money right now. It’s a recession! Would you ask a starving man for food? Would you ask a politician for an honest answer? Would you ask Barry Bonds to fill your prescription? (I know the last question’s not relevant – I’m just curious – would you?).

However, there’s no doubt that for many companies now is indeed a really opportune time to implement some improvements for long term benefit. If business volume is down, you’d have excess time available. But rather than focusing on spending (or more likely, not spending) money, why not start by looking for opportunities to save? Save what? I hear you ask. (I have really acute hearing.)  That will depend on the type and size of business. My expertise is mostly in the wholesale / distribution, where you’d look for savings in your inventory and people costs. 

It is critical in an exercise to be able to quantify the savings you expect to achieve. That way, when you weigh up the effort it will take to implement changes, and the possible external costs (like new technology), you’re in a position to asses the costs and benefits and decide whether to invest the time, energy and money. This in fact is the approach that one should take even when times are good, in relation to business technology projects.

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