The planning of logistics can be quite involved. In the manufacturing process there are purchasing arrangements for multiple components that need to be available all the time. Not only do you have to keep in mind the current levels of stock, but maintaining relationships with multiple suppliers in case of one of them runs out or prices change. You need to allow for enough stock for current orders but also for prospective sales during the lead time before the deliveries arrive. Some clothing companies I have dealt with have to allow for up to 6 months for goods to come in from China.
In the 1970’s there began a move to “Just in time” delivery, which was an attempt to strike the balance between having enough to satisfy customer demand, while not being lumbered with unwanted goods. The main driver for this change was cost control, due to the rising cost of transport, companies had to review the whole process of what was involved in getting goods to market. They found by implementing these efficiencies, they not only brought costs down, but gained a time advantage over their competitors. Toyota developed process’s that could provide a 4 hour turn around on crucial parts.
In order to review these procedures the following is a useful checklist to go through:
Step 1 What is important to customer?
Step 2 How is our service compared with those of our competitors?
Step 3 Calculate the cost saving or additional income that could be generated by introducing a new system.
Step 4 Determine targets and benchmarks to be met
Step 5 Implement the new systems and measure actual results against expectations.
In order to minimise wastage you need to appreciate the type of stock being carried, and prioritise which is to be shipped in order of importance. Depending on the type of goods you would arrange the stock either as “First in First Out” or “Last in First Out”. The former is the most used as the oldest goods are sent first which limits the amount of waste from ageing stock (food etc.). The latter is mainly used for fashion or tech companies that need to get the latest models to market.
The potential savings and greater opportunities presented by implementing just such a system can be extensive as stock can be the life blood or the Bain of any business. A proper understanding of our inventory give us a better opportunity to make the best use of the stock we have.
Next in the series we will look at the developments of software on stock control systems.
Malcolm Ford has had 25 years business experience and has been involved conducting marketing campaigns for companies both in the UK and in Australia. He currently resells and implements Enterprise software systems.
