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Inventory: The bank account that’s not in a bank

Posted by Tom LarsenFeb 12, 2014 Operations, Planning 0

Once you have multiple items and a flowing inventory stream, inventory becomes a very real challenge. With inventory on demand by Customers, stocks running low on different items at different rates, supply chain hiccups or delays, issues in customs, all in all, it takes on the appearance of a dynamic nightmare.

What is often lost in this process is the very real awareness that the inventory is the life-blood of the business. Every piece of inventory is worth an amount that was paid for it, and an amount for which it can be sold. Therefore, each piece of inventory carries a legacy of previously spent money, future derived revenue and a potential for returns.

Being out of stock, having overstocks, having supply problems, are all par for the course in the best run businesses. How well the business management keeps track of inventory demands, talks to their customers and suppliers, pays attention, maybe daily, to the ebb and flow of inventory is no less important to the business than it is for the stock looking to buy and sell stocks watching inventory levels and price movements.

Yet, despite all of this vital importance of inventory and the money it represents, many entrepreneurs treat their inventory with low importance. For any inventory based business to thrive, however, it is inventory, and therefore the inventory management, that will make that happen.

Proper management of inventory is complicated. To manage the logistics, planning and replenishment takes a devoted effort and ongoing maintenance. Measuring inventory turns and knowing how well the money it represents is working for your business if critical, especially in the early stages of a business when every dollar counts. Whether dealing with MOQs, JIT, 3PLs or any other acronym, it is and always will be, the inventory that makes the business fly. Your inventory needs to be just right for your business to thrive. Anything less is costing you opportunity AND money. And it doesn’t take a college degree to know that when you run out of opportunity or money, the business is toast.

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