Inventory Best Practices

Okay, so you implemented best practices for your inventory management system only to realize they didn’t work as hoped. Rest assured: best practice implementations can fail despite good intentions. The fact is that not all best practices are “one size fits all”—you’ll need flexibility to implement them in your unique environment.

Drawing on his consulting experience at Ernst & Young, author Steven Bragg breaks down inventory management functions and provides the best practices within each category including purchasing, receiving and shipping, storage, transactions planning and management, and warehouse layout.

A chart at the beginning of each chapter lays out the cost and time-to-implement each practice. Readers can pick and choose particular areas to focus on.

Before getting started, the author recommends taking a look at your existing systems. Do a cost-benefit analysis to explore fiscal vulnerabilities. Be sure to train employees in how to function in a new work environment. Communicate the plans at all levels. And, what good would all this be without instituting a post-implementation review? Feedback from evaluation helps drive future improvements.

What happens when a best practice fails? Bragg recommends that managers examine the circumstances and ask themselves several questions. Start with benchmarking—are your competitors doing better than you in measurable performance areas? What is the disposition towards change in your organization? This could impede your efforts. Also question the company’s financial health—maybe this is not the best time to institute some best practice changes. If there aren’t enough resources to do it right, don’t try it. Finally, how long has current management been in place? Newer managers are more likely to move fast and make less effective, shortsighted decisions.

Why do some best practices fail? A lack of planning, cooperation, and preparation are the key culprits. With that as a setup, the author gets into the nitty-gritty functions of inventory management in each chapter. Bragg also draws on his experience as a CFO and comptroller in chapters covering cost accounting and bills of material. Throughout the book, he delves into 200 suggested best practices for many aspects of inventory management and provides tiers within each section. This may seem like an overwhelming number, but you don’t have to use all 200 practices. Bragg says, start with a few and build on those that work for you and your organization.—S.J. Johnston [ HBS Working Knowledge – http://hbswk.hbs.edu/archive/4520.html ]

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