We held a webcast today with Jon Schreibfeder, sponsored by Sage. Great attendance with more than 300 onboard! Not surprising as Schreibfeder has provided so much value to the distribution industry for more than 20 years. And he is a great presenter. You can listen to the 60-minute program on-demand here. Or order it on DVD.
Here’s a brief recap:
Schreibfeder covered some basic but critical rules for managing core inventory, dead or excess inventory, and speculative inventory. He directly connects profitability to inventory practice. It’s not rocket science but his experience shows the industry as a whole does very poorly managing inventory profitably.
The big issue is that every distributor carries dogs they know are unprofitable to support other profitable sales with customers. Everyone has salespeople who insist that “if we don’t carry X, we won’t get the business.” That’s fine, Schreibfeder says, but this is a slippery slope that needs careful and deliberate management.
Here are a few stats that really stuck with me: Schreibfeder said that 80 percent of a distributor’s sales typically come from just 10 percent-13 percent of stock items. About 95 percent of sales come from 50 percent of inventory items. That means 5 percent of sales are coming from 50 percent of inventory items. Schreibfeder’s punch line: It is critical to rank and manage fast-moving items.
If you’ve attended one of his presentations, you know that Schreibfeder classifies your inventory like a Clint Eastwood movie: the good, the bad and the ugly. Good inventory is profitable. Bad inventory may not be profitable, but may provide important support to the profitable items. Ugly inventory is everything else, and has no business being stocked. Get rid of it.
The real problem is that many use gross margin as a metric, the worst in Schreibfeder’s view. He reviewed better metrics that allow you to take control of managing inventory. He also gave a lot of practical tips on balancing and liquidating unwanted inventory.
On a side, note, Schreibfeder mentioned that one of his mentors was Buddy Silver. That was a name from the past. He was a long-time contributor to MDM in the 1970s and 1980s. When I came into this industry in the mid-1980s, I remember his name well and how well regarded he was. He certainly left a legacy!
Listen to Schreibfeder’s program now. Here’s more information on his latest book, Achieving Effective Inventory Management. Order it now and get the DVD of his latest program free.
