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In ‘The Goal’ - a bestselling management book by Eliyahu Goldratt, the author makes an unexpected discovery during a hiking trip with his son and Boy Scout troop. Faced with the looming threat of his factory shutting down, Goldratt grapples with finding a solution to save his business and job. During the hike, he has a crucial realization - the pace of the slowest hiker determines the speed of the entire group. He applies this insight to his manufacturing plant, where inventory issues involving intermediary products threaten production efficiency.
Goldratt's breakthrough highlights a crucial principle - the slowest-moving item in your inventory dictates the overall turnover. While this may seem simplistic, it drives home a fundamental truth - focusing on the slowest component can unlock the potential to streamline your operations. This concept is widely accepted and hard to dispute.
Depending on the value of the money and the spread of your products, you will be forced to recognize the puppy hiding in your store sooner rather than later.
Now you are wondering who the puppy is. We are referring to what retailers often call “dogs” or slow-moving items that simply refuse to leave the comfort of your Inventory stores. These items occupy precious space and make up a good chunk of your cash, which is only in the accounting books!
This article identifies ways to proactively avoid such situations and prevent the creation of “retail puppies” in your warehouses or stores.
THE BASICS, AS ALWAYS.
When dealing with inventory, you must recognize that you are dealing with valuable items that need to be tracked from when they step into your store until they leave. Of course, we don’t recommend doing this physically, nor do you need sophisticated devices tagged to each item. While asset tracking devices will help, they are not always required for most small to medium businesses. There are far more cost-effective solutions.
We have included some below that are entirely free and require only a little dedication and discipline from you.
To begin with, it is necessary to track all your inventory items simply, as below, to identify what is effectively coming into your stores and what is leaving out based on the date. This is a crucial starting point.
This lets you identify the number of days the product has been lying since it was last sold. The last column helps you group the different products that may fall into specific ranges. This way, you have a heads-up and can take necessary action to package the product before it is too late.
Depending on your product category and type, consider different ways to set a benchmark against each category and then choose the appropriate strategy relevant to the market to dispose of the product quickly.
As they say, an unsold inventory occupies your space far too long than it should strain your resources in different ways. Before you know it, the spread of product increases, your carrying costs balloon, and your overall efficiency dramatically reduces.
If left unmonitored, one thing leads to another, and not only will this affect your inventory turnover, but it will also prevent you from stocking the right products that your customers may need.
Have you experienced slow-moving items becoming a challenge in your stores? Could the guide mentioned above help you manage inventory more efficiently? We are eager to hear your thoughts!
By leveraging HAL’s Inventory Management solution, you can proactively identify and address slow movers, ensuring a more efficient inventory turnover and improved profitability. Book a demo today!
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