MRO Today - Inventory turnover

Inventory turnover

by Bill Gaw

There are two methods that produce immediate results relative to reducing inventories: The first and best method is to ship it as customer invoiceable products. The second is to stop inventory from arriving at your receiving docks.

The first is fairly straightforward; if you're currently scheduling your factory with an ERP/MRP system, investigate the benefits that sequential production and point-of-use logistics could bring to your manufacturing environment.

It may be that a few crucial, up front changes could dramatically speed up shipments and inventory reduction.

The second method is one that most material managers dread – turning it off. Early in my career, as a materials manager, I was told to stop inventory from arriving at our receiving docks; it was in the form of an executive order.

I was directed by my CEO to limit our monthly inventory intake to 75 percent of the previous month's inventory relief.

Such simplicity was not in my standard operating procedures. How do you keep shipments going out the door with such a restriction? What about our commitments to suppliers? How do we know what to stop from coming in? And, what happens if the inventory restriction stops parts from arriving that are required for outgoing shipments.

As a materials manager, I was so directed twice and I hated it. I always took the position that I was a professional and did not need nor want an arbitrary dictate to control the execution of my inventory responsibility. As much as I detested the dictate, I learned that this arbitrary decision actually helped focus our inventory reduction efforts and in one case saved our company from bankruptcy.

To cope with inventory mania, you will need to consider unconventional inventory reduction actions. The arbitrary dictate of limiting input to a percentage of output – while I agree is not a professional approach to inventory reduction – is one that helps to get the job done.

So before your CEO gives you such a directive, self-impose one on your materials team.

Bill Gaw’s manufacturing experience spans more than 35 years. During those years, Bill has held positions as a shop expeditor, production planner, buyer, manufacturing manager, director and president. Bill has participated in four successful financial turnarounds.