Company’s Changing Relationship with Inventory

Oct 19, 2017 6:19:00 AM

Companies today are tasked with major decisions regarding inventory, storage managing, changing distribution channels and many other disruptive changes to the a once standardized and over analyzed business process. Managing your inventory has changed and will continue to change in the most disruptive ways.

In our five-part discussion the following topics will be discussed:

  • Inventory Management (overview and disruption)
  • Changing Supply Channels (domestic and aboard)
  • Change Inventory Systems and Controls
  • Changing Distribution Channels
  • Changing Company Relationship with Inventory

Today it’s a tedious task with real business consequences if managed incorrectly. Wrong, old, late and just bad inventory management can lead to slower order fulfillment, which extends your cash flow cycle of money going out of your account and money coming back in.

The wrong decision will burden the enterprise with many other costs, such as higher interest rates from vendors and the inability to spend money on operational costs as your money is tied up in inventory. It’s not just money that is impacted. Customer service is often affected with customers having to wait for a product or go somewhere else to find it. This can lead to a staffing increase, as it takes longer to find products and longer to deal with those customers affected by the stock issues. Laws, codes and markets play a role with regulatory and environmental risks that that come in play with obsolete inventory that needs to be disposed of.

Here at MTC Systems, our experienced business analysts, managers and directors will present how your company might avoid common mistakes and manage disruptive change regarding inventory.

Inventory Management (Overview and Disruption)

Most companies generate sales from inventory. Service company’s sales are generated from the inventory of resources (inventory of skilled workers).

Inventory: “The value of materials and goods held by an organization (1) to support production (raw materials, subassemblies, work in process), (2) for support activities (repair, maintenance, consumables), or (3) for sale or customer service (merchandise, finished goods, spare parts).


Portrait of manual worker and manager scanning package in the warehouse


Inventory is often the largest item in the current assets category, and must be accurately counted and valued at the end of each accounting period to determine a company's profit or loss.

Organizations whose inventory items have a large unit cost generally keep a day to day record of changes in inventory (called perpetual inventory method) to ensure accurate and on-going control.”

Traditional industry approach was to deploy programs for inventory control, resource controls, software and manual system controls to assist in managing, holding and distribution of inventory. The belief was to offset the fear of being out-of-stock for customers.

Companies were buying volume trying to reduce the cost per unit, but it also means that your cash flow is restricted until those items have been sold. It’s not just the cost of the item itself. The cost of storage or warehousing can also be high – property, electricity, keeping things the right temperature, etc. And if you don’t sell it at the right point in time, you could end up marking the product down, discounting and disposal just to move product.

Disruption at the core. Today businesses see a blending of manufacturers, suppliers, distributors, retailers, box stores, company stores and outlets and mass direct web companies as both an opportunity to extend their reach and overwhelming competition at all levels. All this disruption is based upon INVENTORY and four baseline topics:

  • Product Creation and Controls– product (getting the item to a marketable state) - sampling process (secure the process) – marketing process (understanding expectation of the consumer of your products)
  • Supply Chain Management - Vendor management
  • Distribution Channels – who – when – where (media) – controls
  • Inventory Stock – where – when – how long – 3rd party - controls

In this series Company’s Changing Relationship with Inventory we will address how new elements in inventory management require companies to step up their game in order not to be left behind. Understanding the issues will allow the exploration of new software and training process to minimize the disruption.

A production/ manufacturer/ supplier - inventory - distribution system is often composed of a factory which produces the goods and a hierarchy of warehouses that stock goods for distribution.

Today stocking and distribution can start at any point in the cycles. Each process point will need to make predictions of how much supply you’ll actually need and when.

Once we understand stock, you need to be able to track it. Opportunities for miscounting stock are everywhere. From receiving the shipment, fulfilling orders or even staff use. It’s also important to account for breakages or damaged goods. Next: Changing Supply Channels (domestic and abroad)


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