Manage Inventory and Save Cash
In 2001, Cisco has written off
Rs.15,000 Cr of Inventory !!!
Cisco is USA based IT company having Employees
strength of 75,000 and Sales of Rs. 3 Lakh Cr, selling switches and routers in
more than 150 countries.
Why it happened with Cisco and what
about my stock ?
To manage
inventory - is not only a job of store keeper, it is a joint responsibility
of Sales & Marketing person to
forecast the demand and predict the market condition, job of Purchase officer
to have a agreement with supplier to buy
items on JUST IN TIME basis through out the year, Job of an Accountant to
alert the management when Inventory
level is high by doing ratio analysis.
If Cisco can fail
in managing inventory issue because of above reason, we may also fail.
To avoid such
excess inventory problem, we need to implement EOQ (Economic Order Quantity)
Model in our business.
Where,
D = Demand
per year , Co = Cost per order, Ch = Cost of holding per unit of inventory
It gives us Standard Quantity to be
Ordered for Raw Material, Components or
Finished Products to minimize the cost and to also to avoid stock out position.
As every stock carries charges like telephone charges, bill process time,
storage space, rent, insurance, taxes and importantly our working
capital/Liquidity and if stock is not maintained then we loose customer &
money. Therefore inventory management is double edged sword.
So, Can we say
that - It is the right time to have a look at our Inventory Management Systems
because Coca Cola has lost Inventory at least of Rs. 1,000 Cr in these season
and Real Estate has fund blockage of Rs. 25,000 Cr.
There is no need
to buy extra software’s or store manager for solving inventory issue, simply it
can be done in Excel, only requirement is commitment to do it !
In today’s
scenario as well as in future, to maintain liquidity & Inventory, EOQ base
company would have greater comfort then others.
Management Consulting IKUCHI/Stock/3
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