Inventory Management: Focus on the Fundamentals

• Prioritize the problems. In most cases, the 80/20 rule can be applied to merchandising and forecasting. It’s not uncommon for 20 percent of the products to require 80 percent of your attention.

  Whether the problem is forecast errors, overstocks or out of stocks, the earlier you know which 20 percent of the products have the greatest need, the sooner you’re able to take the necessary actions to improve results. Generating hot lists and exception reports on a regular basis lets you focus your time for maximum benefit.

• Make your best buy. Once you know what products you need to buy to meet forecasted demands, be sure to act. Make your purchase to take advantage of the best terms and ensure timely delivery, whether it’s regularly stocked, manufactured or imported.
• Minimize the impact of problems. Warehouses are full of misplaced optimism. The quicker you’re able to respond to overstocked inventory, the more likely you’re able to act in time to liquidate the products while getting the highest dollar recovery. Or you may still have time to cancel the order and incur a cancellation fee that’s more cost effective than trying to sell the product.

How Do You Know?
What gets measured gets managed. That’s why it’s important to select three or four specific metrics that allow you to measure inventory performance.