Inventory, again, it's that time of year....

[Sinifar]

An old subject, but our annual inventory is coming up. I take it in September not January when I would have to sit out in the freezing cold van and verify the count. In that light I have been thinking about the problems we have had over the year, and got out my guide.

For those who are old enough to remember this - Locksmith Ledger Vol. 50 No. 8 June 1990 - Business guidance and flat rate manual.

Yup still have mine it is inside of the National Locksmith Flat Rate Manual. I don't just "guess" at prices, I work them out, usually in the fall for next year, based on last years numbers. So here is what I am thinking about as I read thru this article, on Page 38 --

Your inventory should be determined by -

1) Sales volume - That comes from Quick Books, and what we sold.

2) Availability of merchandise - This is the rub - we used to be able to just call and go over and pick up stuff, now?? AND why has the supply chain started to drop items or worse, only stock them in certain branches, not the one closest to us? What should that be telling me as far as what to stock? OR not to stock? Where is the industry going anyway? More - what should I be carrying on the shelf and will it sell? OR JUST be another thing to drag along on jobs? Will it ever sell? What is going to be needed on Sunday afternoon?

In all my years I still don't have a clue as to what I will need - or not need into the future. I try to work that out by what we sold, and what I had to run for, and worse, what I had to order out while the job sat waiting for parts / locks / door closers / what ever. AND how long it was going to take for me to get the stuff, and then get the job back into the rotation and get it out to the client. I hate that second call back to finish the job, when it should have been done the first time. Especially when it is part or lock I should have carried - and - due to slow moving dropped it from the inventory.

It always surprises me what comes up in the course of business. Stuff I thought would never sell is suddenly needed - stuff I thought was going to sell like mad suddenly turns cold. Now what? I don't have a crystal ball to see into the future, and one never knows what will be needed next. The buying public is too "price point" centered and finicky.

I don't want the big box to set the tone, but I do go over there and look at their prices and note what they are selling and for how much. But what is more telling is this - the better locks they sell - look behind the ones in front. See the dust? Those aren't selling at the box either. Cheap junky locks sell best around here. Even the "black label" LSDA we sell is hard to get the public to buy. I do sell tons of it to apartment owners and businesses who really know a good lock and at a good price, so why not the public?

3) Lead time for completion of job. This is a no brainer. With enough time I can marshal enough hardware to fill the job. I just did it with 140 deadbolts, in US26D for a large apartment complex. Mostly given enough time I can find the stuff and get the job done, so I don't have to stock that deeply. At least I never hope I am in that position. That is a lot of cash to have sitting around.

4) Discounts you receive for purchasing larger quantities. Umm, ya - large quantities. Here again one is in a corner. How much do you buy at one time and how long is it going to take you to move it? Ages ago we could move case lots of deadbolts when there were 48 in the case in a month. Today with 12 in the case sometimes it is hard to move that quantity in a year. Boxes again, and finicky public.

5) Your ability to store and maintain good inventory control over purchases. Another sore point. Where exactly is that stuff anyway? I have tried to make "locations" for things and move them there when we buy them. My grade 3 locks are all in one area of the truck, and one area down here in the bunker. Other locks have their own "address" and go there when purchased so I don't have to rummage thru the whole van or shop looking for them. BUT then there are the 1001 pieces and parts we stock. For some reason those things always seem to find a way to get lost in the piles of stuff. Yes I do have exact places where I usually store them, but in a rush -- things get tossed in odd places and forgotten. When I do come across the misplaced stuff I goes into the right place, but until then? AND Now I need that exact part? I know I bought some but where is it now? Buy another, probably bag of 10 of something and use it on this job, placing it in the right place, and later finding the missing stock - now - I have tons of stuff. Probably slow moving - if ever again.

6) Alternate uses for inventory dollars. This ends up being "retained earnings". Rather than stuff more cash into things which are slow moving, stuff it into the bank and sit on the cash. If I need it in the future it is there.

This brings me to the business cycle and what is going on. Are sales holding solid? Growing? or declining? Is the phone ringing or not? What are we getting calls for? What can I make into a quick sale while on the job? What extras can I upsell on the job? If it is not on the wagon I can't sell it NOW. So what do you stock exactly?

Just another thought - inventory is investing in your own business. When business is good I try to bank some cash in hard goods like stock against the future price increases. When business slacks off, I sell off the excess inventory and extract the cash back out. It follows the business cycles.

It isn't rocket science, but it is a lot of black magic to figure what will sell in the next six months - and if it does not sell? Now what?

In the end you end up eating a lot of stuff which used to go like mad and is now gathering dust. Next month something else will catch on and now scramble to find inventory to sell.

This is the problem. As I sit here and count boxes and make sure everything is where it should be - now into the future what do I stock / drop / add to the pile?

Last thought from the article - Remember, merchandise that does not regularly sell, does not make you any money. While your shelves may be full your pockets may be empty. Keep enough good on hand to professionally service your customers but not so much more that your are strapped for cash. Your inventory is no different from cash. It needs good management.

Ergo - the problem as I sit here and contemplate taking inventory, the current business cycle and trying to figure out what the future will hold.

Sinifar

[cledry]

The rule is whatever you have on the shelf will not be what the customer wants, or if you do have it you will always be one short of what is needed.

We have customers that have a time constraint on our performance grade and to keep these accounts we have to keep a high score. So we keep things in stock that these customers want.

Walk in customers generally don't want to have to return to buy something so we keep a good stock of these sorts of things.

Most other things we can buy locally, we have Midwest Wholesale Hardware, IDN Armstrong, Clark Anixter, CR Laurence all very close by, 3 of them are within 4 miles of our shop. A day out we have Security Lock and a few suppliers we don't use like Locks, Southern & US Lock. There is no point in us stocking Von Duprin exit devices or Corbin Grade 1 or Best because they are expensive and can be had the same day usually.

Sometimes I wonder where all of our stock goes though. I would love top control the inventory and dole it out to the guys on the road on a per job basis but we are too busy to do that. As it is we have to have 2 guys in the shop to just handle shop traffic, phone calls and scheduling and ordering. There is a lot of paperwork with a lot of our jobs, we might have to do a site survey, take photos and send, then do a quote, then order the parts and then do the work, get more papers signed, take after photographs and send all of that with an invoice then wait 90 days if we are lucky for a payment.

[jeffmoss26]

Sounds like our place...we have a whole warehouse team, everything is inventory controlled through the computer system including shelf location. They do cycle counts and inventory everything a few times a year.

[dll932]

When I used to work at a local firm with several trucks, whenever we got stock in, all the road guys would grab it knowing we probably wouldn't get more in anytime soon. I suggested the idea of an inventory for each truck. The serviceman would write what he used and be issued another one. I also started an inventory of blanks myself which I would monitor myself. Additional stock for certain jobs would be issued as needed. After a while it worked out pretty well.