Column: Getting a handle on inventory

Last time we did inventory was three years ago. Inventory is a big project. It takes a lot of manpower to do it. I feel like, “why bother?” even though I know things are slipping through the cracks. Help me figure out a better way.

Thoughts of the Day: Many small businesses overlook inventory ”” that doesn”™t make it right. Managing inventory flow can put dollars in your pocket. Get a firm handle on what needs to be ordered and plan it out. Regular inventory counts make it easier to correct errors, spot losses and identify opportunities for savings.

Set up a place to receive, store and distribute goods. Cut down on the number of people who can order and pick up materials. Log everything in and out. If parts need to go out into the field, set up a standard stock for each truck.

The best of intentions can turn into the worst of outcomes if you don”™t have access control. People stop by inventory storage, pick up parts they need and forget to write down what they took. Clients don”™t get charged. Parts disappear. Profits decline. Who wants that? You work too hard negotiating prices with clients to give back even a small portion of profits through loss of control.

With each order, develop a parts request form. Note on the form if the order is for standard materials or if extra or unusual parts are needed. Get the parts request forms to a central desk that reviews what”™s in stock and places orders to meet delivery date, work with preferred vendors and get the best possible price.

Reduce the amount of time that parts sit around. Work with suppliers who can deliver parts with a few days to spare, not weeks or months ahead of time. That will help protect cash flow. It will also help to reduce losses and miscounts in cases in which inventory gets used for something other than what it was planned for.

Set up inventory storage racks and keep everything locked up. Assign someone with good detail and clerical skills to keep track of what goes in and out of inventory, backed up with a purchase order system. Issue a purchase order when inventory stock is requested from a vendor. Record the agreed upon price of the parts on the PO. When the order comes in, check it into inventory, using the PO to verify quantity and price.

Set up an internal system to check inventory out of stock. Record who got what parts and when they got them. Make people accountable for recording what”™s used and returning unused inventory to stock.

Once you can control inventory in and out, back that up with a regular counts of what”™s sitting in storage. Don”™t try to count everything at once. Set a day/week or time/day to count. Work through sections of the warehouse each week. Have a check sheet to write down when counts don”™t match what is expected to be on the shelves.

Assign someone to do research on what”™s missing. Create a form to log lost, broken or missing parts that people in the warehouse, the factory and the field can all use. Keep track of who is having the most problems and who is the most accurate. Set up training sessions to improve accuracy. Treat losses seriously, reward accuracy.

Teach your people in the warehouse, and those who are asking to pull inventory out of stock, that inventory is just like cash. Manage the pennies and the dollars will take care of themselves.

Finally, having an accurate inventory count will give you more leverage with your bank. Inventory is like cash. If you can”™t sell it back to the manufacturer or distributor, at least you can use it to make something you can sell. While it is sitting around, it has value. Make sure you understand that dollar value and keep track of it on you balance sheet.

Looking for a good book? Try “Warehouse Management: A Complete Guide to Improving Efficiency and Minimizing Costs in the Modern Warehouse” by Gwynne Richards.

Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at (877) 238-3535. Do you have a question for Andi? Please send it to her, via email at AskAndi@StrategyLeaders.com. Visit AskAndi.com for an entire library of Ask Andi articles.