Category: Supply Chain

Investigating Inventories

By John Peter Koss

Beverage product inventories will always be a major concern for producers and distributors.  Why? Some reasons are: Carrying inventories cost money, no inventory creates out of stock, wrong inventories affect market service, excessive inventories lead to operational problems and maintaining inventories can present space usage problems. These are realistic; however, more significant than the why question is—what causes these situations in the first place?

Observations and investigations verify the “why question” and to some extent the “what causes” situation.  Probing further into the current inventory arena found additional problems: 1) management inventory policies or rationales, 2) product and/or package obsolescence, 3) marketing promotions, 4) handling and damage losses, 5) failure to acknowledge carrying costs and 6) the SKU explosion reality.  

In most cases, beverage managements have made concerted efforts to improve inventory function. In some instances consideration was given to warehouse and inventory elimination.  Such an ultimate handling of product from production to shipping has worked in specific environments; however, all factors have to approach perfection for success.  The major action for most was becoming acquainted with an “integrated supply chain” and establishing requirements and responsibilities for its execution. That meant detailed analysis and evaluation of the supply chain from raw/package materials input, through process conversion and into finished product storage and distribution. If this action is not taken, establishing effective and economic inventory controls will be difficult regardless of any application.

Other investigations revealed a myriad of steps taken to establish a realistic inventory control program. Warehouse management systems (WMS), paperless order processing, automated order picking and cross docking practices and more would appear to solve many inventory problems—and they do. However, observations indicate in numerous situations these control applications and/or “best practices” are effective to some degree but still do not resolve the inventory quantity and cost dilemma. A review of the causes/actions that continue to exist in the “inventory arena” and suggested approaches may be valuable.

Manual warehousing is giving way to automated storage and retrieval. In pre-distribution, hand picking is being replaced with sophisticated staging and conveying systems. Whether manual or automated, both methodologies are geared to handling physical inventories for distribution. These are mechanical means of handling the inventory, but what about the inventory itself?

Realistic inventory policies must be established to service the market and prevent out of stocks. Software programs must ensure proper materials flow through the entire supply chain.  Package obsolescence must be monitored to prevent inventory buildup. Package promotions must be scrutinized to eliminate excess inventory.  Space utlization must be constantly surveyed for maximization. And, to reduce inventory cost and quantity—this is only the beginning.  

John Peter Koss, a beverage operations advisor, is a licensed registered professional engineer and has 50-plus years of beverage business experience. He can be reached at oleboss@aol.com.

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