Treating inventory as ‘CASH’ is crucial for SMEs. About 20% of stock is often overlooked, leading to non-moving or damaged goods. This oversight inflates profits on sheets, not in the bank. Shifting perspective transforms handling — vigilance, daily counts, and prevention of obsolescence.
To keep inventory liquid, maintain optimal levels, preventing excess. Unfortunately, many lack a strategy, resulting in millions blocked in surplus stock.
There are two main reasons contribute to funds being locked in inventory:
- Ignorance of Ideal Inventory: SMEs suffer from excess inventory, unaware of the ideal quantity. Calculating the ‘ideal inventory’ involves determining the Expected Delivery Time (EDT) and Total Lead Time (TLT). Engage consultants and use business intelligence tools for accurate computations.
- Overproduction: Organizations often produce more than they can sell, relying on outdated sales projections. Monthly reviews, early warning systems, and analytics solutions aligned with actual sales trends can prevent excessive production and procurement.
Addressing these issues ensures millions locked in inventory can be released and boost the bottom line. Stay tuned for more insights in my next blog.
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