Despite the focus on inventory (check out Dave’s article “Inventory errors cause revenue losses”), we as operations managers, do not actually manage inventory. We manage production, resources, sales, etc. Inventory is a visible measurement of the success of our efforts.
It is generally accepted that inventory records should be at least 95-to-98 percent accurate in order to enable successful enterprise resources planning and provide good customer service. But your information system and the plans, recommendations, and alerts it gives you are only as good as your data. While many companies are able to achieve and maintain inventory accuracy, many more continue to struggle.
Lead time is arguably the most important factor in manufacturing and distribution. To a great extent, it determines how you set up your business, what inventory you carry and where/why, what you can offer to your customers, and how agile and responsive you can be to changing conditions and changing demand.
Companies that don’t do a detailed forecast are greatly limiting their ability to marshal their resources to meet customer demand effectively. They will likely be caught with too little or too much inventory at some point, the need for expediting or overtime, and some disappointed customers and lost sales.
Business and profits can increase in the coming year, new products can soar to unexpected heights, inventories can shrink (in a good way) and productivity can reach an all-time high. Now here’s the bad news: none of these things will be delivered into the stocking hung on the fireplace mantel by some jolly fat man in a soot-stained red suit.