Inventory control: Stocking your shelves
Do you like to play games? Most of us do but only if we win, right? When it comes to your business, however, it is difficult to play guessing games. Without having a specific system for inventory, you are gambling with the success of your business. Unfortunately, that is one game that your company is most likely to lose. As we all know, every game must have a winner, and why shouldn't it be you? Inventory is an important part of any company. You need to know specifically what items are in stock and what items you need to order. You may not need some parts right away, but they are important to have in stock in case you have an equipment breakdown. As you will see, having a well-established inventory-control system isn't difficult or complicated. With a little organization, the time you spend now will be well worth it in the end.
Frequently needed parts The three main types of products you should keep on inventory are "blue-collar" items, frequently needed parts and "insurance-policy" products. If you keep these items in stock, you will have few time delays, you will save money, your operations will be smooth and, most importantly, your customers will be happy.
* Blue-collar items are items you use on a day-to-day basis and that are necessary for daily operations in the field. Some good examples include trimmer line/monofilament, rake heads, edger blades and 2-cycle-engine oil. * Frequently needed parts are those you don't use on a daily basis but do sustain wear and tear. These items would include belts, mower bags and blades, oil/air filters and tires. * "Insurance-policy" products refer to those items you might have trouble locating at the last minute if you don't keep them in stock. These would include any parts that are crucial to the operation of a machine (see table, page C 8).
Benefits of planning ahead Keeping a well-stocked inventory offers many benefits. At first, you will realize that your business operates smoother, and you avoid having a machine down while waiting for a part. You also have the advantage of having the quality part you want instead of settling for something less, which might not meet your normal high-quality standards.
Additionally, stocking items will save you money on parts. If you have to replace a part that you normally have in stock, you may pay $50 for a $5 part. Your customers will benefit most from your preparedness. They don't want their job to wait because your equipment breaks down, and, frankly, they shouldn't have to.
One way to implement this safety-insurance inventory is to evaluate the need frequency of parts. Look back over the last 2 years, and see how long it took to receive parts and stock them. For example, if the starter assembly on your mower goes out at noon on Friday, and you're committed to a job on Saturday morning, what do you do? That part suddenly becomes priceless. It is so important to have these parts in stock
Consolidating your product brands is an easy and helpful solution. For example, only purchase the same mower brand and use the same brand of two-cycle oil. Also, depending on the size of your company and your needs, you may want to consolidate down to the same class of equipment, the same blower, hedger, etc. This way you only have to order one starter assembly instead of six. Looking at it from that perspective can result in significant savings for your company. In such a competitive industry, preparedness is the key and will be a big payoff to you in the end. No one can afford to lose profits from poor planning; therefore, most successful companies establish some kind of an inventory system to ensure they have the tools and parts on hand when they need them.
Developing an inventory strategy To establish your prepared-inventory system, you will want to start with centralized buying. This entails designating a few specified individuals to make the purchases for the company and storing all of the products in a central location.
This system has several advantages: * You may qualify for quantity discounts * You will spend your time in the field instead of shopping for parts * The system will lead to a better inventory-control system if you limit the number of people responsible for tracking and ordering parts * You will reduce your overall costs.
Now, imagine the frustration of having to track orders, reorder, memorize part numbers, request special parts and deal with all the paperwork and invoices from various vendors. Can you feel the pressure and frustration building? Don't worry, you can help in the details of a well-constructed inventory control. The key word is organization.
A variety of effective methods exist to help you track where and when to order supplies. One such method is to create a label for each box or for the shelf where you stock each product. The label should include the name of the item, vendor, vendor's part and a two-digit code. The two-digit code is probably the most important item on the label, as it is what you will keep track of frequently. The first of these two-digits represents a low-stock quantity. The second digit represents a reorder quantity. Essentially, the code says, "When stock for this item gets down to X, reorder Y." This way any of the people you designate to monitor inventory can spot the reorder point as well as the reorder quantity. A working example would that you have a label that reads 6-12. Therefore, when a supply of widgets dwindles to 6, you will reorder 12; your safety stock is 6. By adding the two together the maximum number would be 18, so if by chance you have 19 widgets, one will be considered overstock.
To come up with your safety stock, take your weekly average estimated time of arrival from the vendor and double it. For example, if it takes 1 week for merchandise to arrive, and you use three widgets a week, plan for 2 weeks shipping time. So six will be considered your safety stock. This leads to a quick way of checking overstock.
To determine your reorder points and the quantity, you'll need to review last year's purchases and uses, as well as the average delivery time. Then you can determine the figure.
The time you invest in setting up your inventory-control system will save you hours searching for those hard-to-find parts, dealing with irate customers and making up for lost time. In addition to dividing the inventory responsibilities, this system ensures that you never run out of items-especially those that are critical to the success of your business. Therefore, you always will be operating at maximum efficiency.
The cost-saving that you experience will result from little downtime, buying in advance, stocking a variety of choices and saving money. Customer satisfaction should be the No. 1 goal of every company. The impact of a satisfied customer helps you earn the mighty dollar. An old saying implies a company's reputation relies on word of mouth: A satisfied customer may tell three people, but an unsatisfied customer will tell at least 10.
No one wants to lose In every company, problems with lost or stolen merchandise can occur. Therefore, you need to focus your efforts on the solutions to prevent losses.
*Restrict employee access to the foremen, crew chiefs and supervisors. This will allow a system that discourages theft and tightens inventory control.
*Restrict the merchandise location. Depending on the size of your company, you may opt to have a full-time employee who logs merchandise in and out as it is needed. This "crib-keeper's" sole responsibility is to secure your inventory.
*Minimize distributed quantities and require employees to return the old piece before taking a new one. This is a way to discourage waste of products or overuse. An example would be to take five tarps on an as-needed basis. By requiring the old piece back before issuing a new one, it is ensuring that the product was used for the job at hand, not for other uses. This encourages the employees in the field to be more responsible with the care of the products. Finally, it allows you to see what products are working well and those that are not. You will gain product knowledge as well as knowledge on a product's performance. A good example would be rake heads. You can keep track if tines fall out and, if they do, how many.
A well-organized inventory system will increase productivity company-wide, maximize operating efficiency-in-house and in the field-and most importantly, save you money by buying in advance vs. last-minute purchases. A common average in this industry is $1 saved equals $10 in sales. So, if you save $50 a month, it's worth a $500 account! Better yet, this is one account that pays on time, is dependable and won't call you at 2 a.m. with a problem. Most people agree that planning ahead and establishing an effective inventory are sure ways to finish first. By minimizing wastes and reducing costs, your company will remain competitive. The more efficient you are in this cutthroat business, the more likely you are to win that bid.
Ron Littlejohn is the general manager for Commercial Landscape Supply (Irvine, Calif.).
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