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Increased Inventory Cost

  • You do not have the information necessary to forecast and meet demands.
    – You have to maintain excessive inventory because you cannot anticipate demand. Your inventory valuation has not increased enough this year, and it has not met your target dollar value.
    – Your sales and marketing departments do not run specials and promotions. They do not communicate
    the potential demand well enough to you. When large orders are quoted, their approach to communicating the probability of this becoming a sale is faulty. Your method of scheduling for orders on quotes is inefficient.
    – Your current approach to tracking lead time on materials is inefficient, and you don’t effectively prioritize
    vendors. You have trouble keeping track of how many vendors you have and how many vendors you typically have for each item.
  • Customer demand is forcing more variation in your product. You have difficulty keeping track of how many SKU’s you have in inventory, and that number has not increased enough over the past two years. As a result, your inventory valuation has not increased enough either.
  • You have no clear way of knowing if an item has not been used in the past six months. you cannot easily identify every process and BOM an item is used in.
  • You are paying too much for materials. You do not go out to bid to your vendors for materials and are unable to consolidate PO’s to gain more buying power. You cannot isolate non-product cost to analyze profitability issues.

About the Author: AJ Amjad Khanmohamed

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