Solomon Bruce Consulting Blog

Wednesday, April 28, 2010

Do you have enough inventory for the sales season?

    The question, "Do you have enough inventory for the sales season" is one that is getting lots of ink currently in the business press.  Many companies, during the height of the business downturn elected to reduce inventory.  Now, with many customers gaining more confidence in the overall domestic and global economy, are spending more money, however, some have been faced with a nasty surprise.  The surprise?  The company does not have any product to sell!
    I talked about this matter earlier in the year.  At that time, I recommended that you be very careful when buying inventory, reviewing your sales data very carefully to insure that you had the right inventory, however not so much inventory that you were unable to turn it as you needed to.  After all, we talked about lean logistics, lean inventory principles and the fact that money tied up in inventory that was not moving is resources that are not working for you.
    However, 6-9 months later, we are seeing that many companies now don't have product and the manufacturing cycle is long enough that, at least for this sales cycle, vendors are foregoing sales that they otherwise could have made if they had product on the shelf.
    One of the most significant of these stories is with farm equipment manufacturer John Deere.  During the height of the economic downturn, Deere closed manufacturing plants, reduced inventory, reduced work in process and decreased the amount of product that were able to ship to their dealers.  Now, customers have gained greater faith in the economy and want to buy John Deere products, however, are finding that dealers don't have product because Deere did not make enough.  In some cases, tractors needed now will not be available until November/December 2010, 4 months past the useful growing season.
    What about your business?  Where are you?  Do you have enough inventory?  Do you have new, fresh, modern inventory that will allow you to fulfill customer demands today?  If not, you may wish to think real hard about getting products that customers are asking for and willing to spend money for.
    I have a friend who is a haberdasher.  He tells a very similiar story.  He wanted more inventory for the winter selling season, however, his manufacturer's representatives told him that the plant had either reduced their production, or had made only 1 or 2 runs of the product and then shut the line down.
    Now, we are all at the mercy of some "manufacturer" someplace.  However, careful planning, future forecasting as well as gut level instincts should allow you to have inventory when a customer walks into your store and wants to purchase your product.  This problem will not "go away"-- so don't dismiss it today.  This is where some futuristic projections and business knowledge will help you fill the customer's demand when he/she comes to buy from you!


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