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inventory management

Business Process Management

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.   

 

Blog Business Process Management

Supply Chain Interruptions and Inventory Management in Crisis

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image of empty pallets

Sometimes it takes a global pandemic to reveal holes in our business processes. Some industries have felt the sting of supply chain interruptions and inventory management.Did you run out of supplies? Did a supplier shut down? Was the demand placed on your business increased or decreased?

Likely, your business faced some sort of change in these recent events, and while it is (hopefully) unlikely we will face anything of this magnitude again in the next hundred years, being prepared for disasters needs to be a part of our business plans. 

Lean Methodology in Times of Crisis 

Lean methodology looks to eliminate waste and improve efficiency – it is the opposite of hoarding. However, that doesn’t mean prudent supplies aren’t on hand. Using a visual inventory method, we make it easy to know when to restock – but what if your supplier suddenly goes under? Whether from a natural or man-made disaster, businesses have seen this happen for decades. 

While developing process maps, it is the role of a Lean Consultant to look at all areas where there could be disruption that creates inefficiency. When done well, we overcome these obstacles proactively. Of course, no one can predict the future or prepare for every possible outcome, but strategic planning around the most likely potential problems helps us resolve most of them, or at least allows us to have some agility in the face of crisis. 

The Case of Envelopes 

In one specific organization I worked with, there was a supply chain issue that was causing company-wide problems. It was an issue with semi-custom envelopes and a replacement couldn’t be found. These envelopes were used for sending out a uniquely large invoice, and because of this, invoices stopped going out, causing cash flow issues. 

We looked at alternates for envelopes and found a solution that saved money on both envelopes and invoices. Because this was a reactive fix, it took some time to implement, however, we were able to adjust and smooth into a new process. 

Being Proactive to Avoid Supply Chain Interruptions

Instead of being reactive, a proactive approach could have anticipated a supply chain disruption and allowed us to make changes to avoid or lessen the impact. The only way to really be proactive is to audit current processes and examine where there are potential problems, and then stay on top of those with a continuous improvement mindset. 

Looking at processes deeply helps us to understand where we currently are and what adjustments need to be made if, all of a sudden, demands increase or decrease. It allows us to make changes quickly to capture opportunities, rather than fail as we slip into holes we didn’t know existed. 

Change will always happen in business. Whether large or barely significant, they can give us space for improvement if we are open to learning. 

 

If you are ready to be proactive, or have found some holes now that need to be filled, that’s my expertise. PBEX, LLC provides a complete review and analysis of the business processes that create efficiency and profitability, and the barriers to them. Contact us today to learn more. 

Blog Business Process Management

Lean Process Improvement and Inventory Management

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lean inventory management

Oftentimes manufacturing organizations find that while their production processes may run well, there is a need for improvement around inventory management. Lean process improvement tools can offer a huge benefit to improve inventory management. Businesses, especially those in retail and manufacturing are finding that lean process management helps them reduce costs, improve customer experience and increase agility, which all lead to increased profitability.

What is Lean Process Improvement?

Lean process improvement is an overall approach that focuses on reducing waste within processes. This waste can come in the form of more efficient use of materials, reducing redundancies and overlap in work flow, and creating more effective processes to improve employees’ work. Popularized through its success with the Toyota Production System, lean methodology is being used by efficiency focused organizations with a continuous improvement mindset.

How Can Lean Tools Help in Inventory Management?

Lean inventory management focuses on refining processes in order to improve quality, reduce cycle time, be more efficient, and reduce costs. By understanding the value of your inventory and the management of it, how it moves through your processes, and how it adapts to demands and lead time changes, organizations are better able to make management decisions and increase profitability.

Inventory management starts with understanding:

Independent and dependent demand needs. Do you have inventory to meet customer demand? Are Sales, Operations, and Production on the same page? Does everyone understand when and why demand fluctuates or how to make adjustments when it does un-expectantly?

Types of inventory you require. Raw material and equipment/tool management is just as important as deliverable products. Likewise, understanding what is currently in the process of being produced and/or delivered effects profits, purchasing, and customer service.

Associated Inventory Costs. Knowing how much time passes between when a product needs to be ordered in order to receive it in time for production (or lead time), ensures you never run out of product. Lean process improvement can be used to calculate holding, ordering, and shortage costs to reduce wasteful spending and costly downtime.

Why does it matter?

Lean process improvement of your inventory means:

  • Improved customer service (meet the demand)
  • Keep inventory costs low (keep what you need in stock and not more)
  • Know your reorder points and safety stock levels
  • Take advantage of quantity ordering when desired
  • Standardize processes for better quality output
  • Improve communication and collaboration between departments

Inventory Management Systems

Because PBEX, LLC focuses on overall systems and processes, we are software agnostic, meaning, we don’t sell inventory management systems. Instead we teach organizations how to improve current processes to make them more effective. If software is chosen to then support, and even further inventory management, it will be more efficient. In fact, you can expect to see:

A 50-100% reduction in quality defects

20-50% Improvement in Productivity

60-80% Set Up Time Reductions

30-60% Improved Safety Performance

40-75% Inventory Reduction

30-50% Floor Space Reduction

And a complete review of your business processes to create long-lasting efficiency, agility and profitability.

Contact me today to learn more about how as a Lean Process and Inventory Expert I help businesses simplify and improve the way they do business to better grow and manage. Together, we will create a continuous improvement culture and healthier bottom line.