When does Inventory Ever Go Down?
author: Lee Buttolph
I ran into a quote that best describes the inventory problem at most companies:
“This CEO was a crusty guy who had no problem with decisions making… One day he said, ‘If inventory goes up when sales go up and if inventory goes up when sales go down, when does inventory ever go down? When the boss says so.’” (1)
The test of a great business quote is that it does three things:
1. It applies to more than one situation
2. It provides a roadmap
3. It authorizes immediate action on the reader
This quote nails all three:
1. It applies to more than one situation
A boss has the responsibility to set the tone for an organization. Not just in purchasing but everywhere (human resources, operations, sales, marketing, administration). A strong boss sets down tough but fair objectives and holds employees accountable to them. Poor bosses set down objectives and either never live by them or changes them often.
2. It provides a roadmap
Having excess inventory is bad for multiple reasons; it wastes cash & space and it adds steps into a process. But, for some reason, no matter what the situation, inventory continues to go up. The normal excuses that are given for inventory levels both in the past and into the future are just that, excuses. If inventory levels want to go down it takes senior leadership to ensure that actually happens. Using tools like Lean Manufacturing, Theory of Constraints, Vendor Managed Inventories (VMI) or just being creative it is possible to bring down inventories no matter the business environment.
3. It authorizes immediate action on the reader
Could reducing inventory be this easy? This quote makes it seem so and it authorizes the reader to make the hard decision that inventory WILL go down. All it takes is determination. It is possible to imagine a boss reading this quote on a Sunday afternoon and walking in on Monday with a new proclamation “Inventory will go down, starting today.”
The next two blog posts will talk about two business cases (one bad and one good) for dealing with inventory.
(1) Bruner, R. F., & Yemen, G. Robb Fitzgerald at Comvia Networks.