Controlling Inventory: a Distributor’s largest investment!

Building Material suppliers (and other distributors, too) have to stock and keep track of thousands and thousands of products. Keeping track of all that stuff is hard work. It’s not just knowing what’s back there, it’s knowing who wants it, and when. It’s knowing whom to buy it from and at what price. It’s knowing when to add new items and when to stop buying some of the old stuff.

I remember when the purchasing agent was the person who had convinced everyone else that they knew the answers to all of the above. And the answers were all processed and kept in their heads! Of course the reality was that they would over buy, so that they would not have to say “we don’t have it” to a customer (or the boss) when an order came in. This maybe made life easier for the buyer, but at what cost to the company?

Inventory doesn’t just cost money to buy, it costs money to insure it, to store it, to count it, to keep it in saleable condition. It must be heated and cooled and even cleaned. Somebody figured that the cost to keep stock is about 30% of the cost of the inventory. And that is EVERY YEAR!

So turning your inventory becomes a key indicator of success. How many times does your “warehouse” get completely sold in a year? 2 times? 4 times? 6 times? 10 times? Or more? The number that is a “good” number varies depending on the industry you are in.

Food distributors had better have a lot of turns, or the food goes into the recycle bin. Car companies have fewer turns, but even they need to keep an eye on slow moving stock. Just watch those year end sales to see what happens when inventory is not turning.

Friendly understands why you need good numbers and even better reports. We offer software and the experience that can help you to manage the largest asset any distributor has….your inventory.