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- ▼ December (40)
Thursday, December 14, 2006
Furniture World offers a very good article by Tom Craig titled "Are You Inventory Rich and Cash Poor?"
The article offers up a good list of the causes of excess inventory and the actions that can be taken to address it.
Some of the causes:
- Business fear losing sales from not having product.
- Companies take good deals and stock up with more inventory than is needed.
- Companies do not write off value through out the year for fear of hurting profit margins only to be left with inventory that cannot sell at all.
- Demand management planning techniques are not used to determine need.
- Companies build in longer delivery time allowances for suppliers that fail to perform increasing the inventory holding time between shipment and late shipment.
- Companies that have no process for ordering inventory are more likely to cushion their operations with too much inventory to keep their customers happy and avoid their own delays.
- Companies might use the same process for inventory management on product types that are not homogenous and do not share similar turn or sales characteristics.