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dead inventory

Inventory Management: Jumping Over Dollars For Dimes

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Photo by Bob Ghost on Unsplash

A few years ago, I encountered a business owner who had recently acquired a company that was going out of business after 15 years. Part of the purchase included materials, some of which were also 15 years old. This acquisition also meant merging the owner’s two companies, each with their own property, into one larger space. 

The owner planned the build out on the new, bigger property, but he was so anxious to turn the abundance of new raw materials into product, he became blind to other areas that needed attention. 

“This happens a lot in life – we get so focused on something, we neglect others. In business, this often looks like jumping over dollars for dimes.” 

Space was made to house significant inventory, which reduced space for other areas, such as production and offices. However, when we looked at the inventory, we found most of it wasn’t useable, and could be sold, trashed or recycled. Doing this freed up significant space that allowed for significantly more floor space, allowing for greater future expansion. We used lean inventory management tools to help us determine what really was needed and usable and what was waste.

Lean Inventory Management

We can’t get blindsided by the desire to make money at the cost of the team that helps us create it. We can’t be so eager for dimes that we jump over dollars to get to them. Instead, we should be looking at everything in our businesses as: Does it make money or cost money? 

The goal of lean inventory management is to eliminate or reduce things that cost money and increase those which make it. Sometimes that is really clear – like eliminating dead inventory. Other times, it’s harder to see, like investing in sufficient office space for workers. Either way, an outside observer can see these blind spots and help navigate effective and efficient change, reducing long-term costs. 

My role as a Lean consultant includes not only seeing the blind spots, but also seeking understanding to the systems of the business to discover and close gaps. Not only do I look for these inefficiencies, I lead management with tools that help them with continuous improvement so they can find and solve issues as they come up – or even before they come up. 

My objective eye prevents businesses from jumping over dollars for dimes, and when cash flow matters, that’s an important perspective to have. If you are struggling with inventory management and want to get lean, PBEX, LLC provides a complete review and analysis of the business processes that create efficiency and profitability, and the barriers to them. Providing consulting and lean process improvement training, we are ready to support your organizational goals. Contact us today to learn more about lean business management and to schedule your review with a lean consultant.