Show me the money
by Scott Stratman
This infamous line from the movie Jerry McGuire is often shouted from the offices of distribution owners. In these economic times, there seems to be either a shortage of money to enhance the business operations, or too much money tied up in non-revenue producing inventory and activities. So where might you look to find some additional money in your business?
The biggest cash consuming item on your balance sheet is your inventory. Without a healthy inventory, it is difficult to service your customer base. New customers often force you to add additional product lines, with the anticipation that new lines mean an exponential growth in overall sales.
Take time to dig deep into your current inventory. Look at all the items with sales of less than four units a year. These are usually products that we once sold more of in a year, but sales have declined to a sub-par level. They might also be products that we decided to carry to service one or two customers only. Could you do without stocking these items and ordering them as needed?
Look at your inventory accuracy. Is what you think you have in stock really there? If you haven't done so, implement a cycle counting program to ensure that your invested inventory dollars are at least accurate. Cycle counting programs are best started right after you do a complete inventory count. This might sound painful, but use your inventory counts to cull out dead, out-dated, non-selling, old, broken, scrap and "should have been returned to the vendor" items. Track the volume of items you identify in the above categories. Some of you will be shocked to see how much money has been sitting in your vault the entire time.
Look at your product lines and see which are producing the highest revenue stream and which are losing valuable dollars. In the non-performing lines, consider setting up a vendor meeting to discuss some alternatives. You might want to renegotiate some vendor minimums with regards to purchases. Discuss some of the vendor managed inventory ideas, where they are providing you with a more "just in time" inventory instead of the "just in case" inventory many of us carry today. Renegotiate vendor return policies to establish more liberal credits and returns. Discuss every payment possibility with regards to vendor invoices.
Many of us have great policies and practices in place today, but fail to adhere to them on a consistent basis. If you look hard enough internally, you will find more dollars - - - guaranteed!
Scott Stratman is vice president, business development, for Tech Systems Inc. He has an extensive background in working with distributors around the globe. Many distributors are familiar with Scott from his previous role as founder and president of The Distribution Team Inc.Contact him at Scotts@techsystems.biz.