Most manufacturing companies struggle with inventory management issues and many believe the solution lies in implementing new software.
But despite what suppliers tell you, a new software system won’t magically solve your inventory problems.
What we find in most cases is that inventory control issues point to management and operational deficiencies.
These shortcomings may include:
- Leadership issues and liability “flaws”
- Unclear roles and responsibilities / communication problems
- Inventory Tracking and Reporting
Leadership Problems
Most inventory management issues, including most other business areas, start at the top between ownership and their management teams. These problems are typically fueled by liability issues and complacent leadership.
It has been reported that a shocking 84% of employees in the workplace actively AVOID responsibility.
To avoid this mindset, generate a system of accountability through daily reporting, weekly meetings and regular training to ensure that everyone has a clear understanding of their role in the system.
For owners and managers, complacency is your worst enemy. Like a virus, it can infect a company from within, creating a culture that accepts mediocre results and poor performance.
More importantly, it establishes a culture that accepts the status quo and doesn’t push for any kind of growth or self-improvement.
The best way to combat liability and complacency issues in your business is to create a culture that says:
“We have to get this right the first time, and I’m going to take the responsibility and lead by example.”
It doesn’t matter how appealing new software seems; if your employees do not do their job properly, it is a waste of your time and money.
Unclear roles and responsibilities / communication problems
91% of employees not understand what their organization or boss is trying to achieve. When these employees manage something as precious as inventory, not having a crystal clear understanding of their roles and responsibilities can be detrimental to the company’s success.
As an owner, you need to know the correct stock level and communicate that to everyone around you.
Be concerned with the physical quantities needed to boost productions. Explain clearly to your employees that the higher the inventory turns/fewer days, the better.
Ensure a constant line of communication between all levels of the company and visit your storage areas regularly.
Make it a priority for yourself and your staff. No amount of software can provide the clarity that strong communication between you and your business can provide!
Inventory Tracking and Reporting
Incorrect inventory management is one of the main causes of lack of cash flow, weak profits and inventory problems. Anything not properly tracked will quickly create and collect inaccurate data. When setting up an inventory management system and reporting, remember to:
keep it simple
Don’t complicate it yourself.
In the past, for example, the stock was checked against index cards and managed manually. It was a simple process, but effective.”
Today, technology aims to make things much more user-friendly than pen and paper.
Monitor your Mins and Maxes
There is an old system called “mins and maxes”. When you reach a minimum, you order up to your maximum level. You don’t go beyond the maximum, you don’t drop it below the minimum.
It is critical that accountability and communication are done correctly along with “mins and maxes”, otherwise things can go wrong quickly.
Don’t allow your employees to have too much inventory as a method of “managing” inventory. Teach them how to properly manage products and pile up unnecessary inventory.
Just because a customer says they need your products doesn’t mean they will buy!
Follow the golden rule
To remind, Nothing good happens when the stock runs out.
Unless it is sold or used for its intended purpose, the inventory will only go bad, get stolen, break, get run over by forklifts, become obsolete, etc.
The longer you leave your inventory, the greater the risk of something bad happening!
While times have shifted to the digital age, it’s important to remember that technology isn’t always the answer. To remind…
Software doesn’t solve operating problems, it exacerbates them. If you throw garbage in, garbage comes out!
Keep production processes solid
Inventory management as it is is your life. It’s how you make your products, how you build your profits, and everything else follows when the manufacturing process is rock solid.
You can have the best facilities, the highest paying customers and the most comprehensive software, but without a good plan you will never be able to maximize the profits of your business.
Give your employees a clear plan, define their responsibilities and be accountable to yourself and your company!
