Issue link: http://www.e-digitaleditions.com/i/375553
continued on page 18 12 FEDA News & Views T ransitioning from a branch-manager-based purchasing scheme to a centralized purchasing model is never an easy project. The inventory manager has a very difficult challenge. On the one hand, they're being pressured from the financial side of the company to reduce inventory and increase turns. On the other hand, they must stock enough of the right product to satisfy the customer to a very high degree. Unfortunately, the two are not mutually exclusive. The finan- cial side must support strategic inventory increases in order to shore up customer service levels; but more importantly, the sales team must feel like the inventory man- ager has its best interests at heart. Gaining this trust is a critical step in any inventory optimization plan. The great divide between sales and pur- chasing comes down to perspective. From the sales perspective, the question is, "Why can't you just buy what I sell?" The purchas- ing camp comes from an opposing view- point, "Why can't you just sell what I buy?" This is the classic chicken or egg argument. Neither is right—although many a meet- ing has been held trying to convince the other of the logic behind each argument. Since sales arguments tend to be more emo- tionally based, I believe that the only way the purchasing side can bring resolution is through the reliance on data. I was recently reviewing a scorecard that one of my private clients created. In this scorecard, there were a couple of really solid metrics relating to inventory turns and customer service levels. I am a firm believer in building these types of scorecards so that both sales and operational teams can chart their progress. This type of documentation goes far beyond taking the company tem- perature by revenue levels. As I helped the owner get down to his root priorities, I started to realize that the inventory management team was going to have to come up with some fairly strategic moves in order to meet expectations. I reached out to the gentlemen charged with correcting the inventory levels and offered some advice on how to make the necessary improvements. Both of them are very versed in mak- ing system changes, but they were a little stuck on where to begin. Remember, the job is about balance and not tipping the scales to one side or the other. However, what I shared with these folks is that balance could only be achieved once they convinced the owner that the sales side would no longer be jeopardized. In order to gain the trust, they had to start with eliminating stockouts and back orders. The Tactical Side of Inventory Control Strategic investments in inventory levels will take care of a back order problem. Buy more and you will not stock out. Seems easy enough, doesn't it? Unfortunately, money doesn't grow on trees. And neither do lines of credit. Since we do not have the luxury of infinite resources, we need to invest our cash in the products that give us the best bang on the customer service buck. These will be your high-hit, not to be confused with high-unit sales items. Those of you who have been reading my articles over the years know where I am going with this. Your highest hit items are the ones that your customers, and incidentally the sales team, care the most about. These are the items that you simply should not run out of. When you do, the credibility of the inventory manager is shot. In order to make headway, inventory managers had to focus their attention on the top 100 hit items in each branch location. Just to clarify. These were the top 100 items by appearance on cus- tomer orders in the last 12 months. For those of you with multiple locations, you know that these top 100 items will not be uniform across the board. Part of the scorecard tracked the number of stock-out days in this top 100 items. Purchasing, Sales and Branch Management How to Conquer the Great Divide with Strategic Inventory Planning The inventory manager has a very difficult challenge. On the one hand, they're being pressured from the financial side of the company to reduce inventory and increase turns. On the other hand, they must stock enough of the right product to satisfy the customer to a very high degree. By Jason Bader jason@distributionteam.com