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A Quick Inventory Opportunity Assessment

When we meet with a company for the first time, we like to ask three simple questions to allow us to make a quick assessment of their inventory status.  We ask: What is your revenue and gross margin? What is [...]

Don’t be Naive About Inventory Management

For the first part of this posting, you have to pretend that it is 1975 and not 2011. You are given a mandate to reduce inventory by 10%. The totally naive thing to do would be to cut inventory across [...]

Variation and Inventory

No one wants to hold inventory. It is necessary because of variation: variation in demand, variation in lead times, variation in raw and finished good quantity, variation in yield (production line reliability), variation in transit times, and of course random [...]

The E&O and Inventory Turn Relationship

At DemandCaster, we are dedicated to helping small- to mid-sized manufacturing and distribution companies better manage their planning and inventory. We try to do that using simple concepts, intuitive tools, and straightforward processes. In our work with clients, we have [...]

Inventory as a Percent of Sales

If you are focused on optimizing inventory, another useful measure of inventory or working capital is the ratio of inventory to sales or inventory as a percentage of sales. It is a very simple and easy to calculate KPI. It [...]

How Much is Increasing Inventory Turns by One?

There has never been a good answer to this question. We have asked our partners in finance and they just gave us a blank stare and did what finance people always do. They asked “Why do you want to know [...]

Inventory Averaging

In our blog posting, Draining the Inventory Pond, one of the companies that we are familiar with has the end of quarter spikes referenced in the posting. In some of their operating units, up to 30-40% of their quarterly sales [...]

Draining the Inventory Pond

Public companies, as we have noted, are required to report financial results quarterly. They do so by making public their Income Statements (P&L), their Balance Sheets which includes inventories, and their Cash Flow Statements. These statements are released quarterly and [...]

The Absorption versus Inventory Balancing Act

At DemandCaster, we always testify that inventory is the ultimate measure of supply chain performance.  Some days we will even say that inventory is the ultimate measure of business performance.  We do not say this lightly.  Right sized inventory and [...]

Optimizing the Cash to Cash Cycle

In the Supply Chain, we worry about service, inventory, and execution.  Do we have the right products, in the right place in the right quantities at the right time?  Are we doing it at the right cost?  Lastly, we are [...]

Tampering: Demand & Inventory Planning

Last week, we posted a blog re-introducing Deming’s concept of tampering.  This week we will explore the how tampering creeps into demand and inventory planning. In the case of demand planning, tampering occurs when we simply think they are smarter [...]

Tampering: What is it? Why is it bad?

Tampering is concept that W. Edwards Deming popularized and used often in his lectures.  It is an important and yet subtle concept that many Supply Chain professionals and general managers still do not fully get.   Tampering is basically trying to [...]

An Alternative Definition of Quality Control: Part 2

The Quality Approach to achieve this alternative definition of quality is to follow the basic tenets of Total Quality.  In 1991, The General Accounting Office of the US Government published a wonderful study, Management Practices: US Companies Improve Performance Through [...]

An Alternative Definition of Quality Control

In his book, Introduction to Quality, Kaoru Ishikawa defined quality in the following way: An alternative definition of QC could in fact be, ‘Everyone doing what should be done, in an organized, systematic way’ It is a very simple and [...]

Thinking Part 2: Optimal Thinking

I recently expounded the concept of Statistical Thinking whereby people, particularly, business people should develop and nurture a conceptual understanding of the role of variation and uncertainty in the numbers we deal with on a daily basis.  It is not necessary [...]

Leadership From The Top

Kaoru Ishikawa is one of the most famous Japanese Quality Control thinkers, teachers, and authors. His books What is Total Quality Control? (1985) and Introduction to Quality Control (1990) are still among the most influential books I have ever read. [...]

Thinking Part 1: Statistical Thinking

The concept of Statistical Thinking has always appealed to me since I first heard it back in the late 1970s or early 1980s. The concept surfaced, in my mind, recently when I began teaching two sections of Elementary Statistics at [...]

Whatever happened to JIT? – Take Two.

Out of all the blog postings and LinkedIn discussions, the 12-22-09 “Whatever happened to JIT?” generated the richest discussion on LinkedIn. It was that good, that I have to write on the subject again for a second week in a [...]

Whatever happened to JIT?

Just-in-Time (JIT) was all the rage twenty years ago.  People were studying the Toyota Production System, synchronizing their production plans with those of their suppliers, and reducing lead times in order to minimize inventory and maximize flexibility and responsiveness.  One [...]

Just Order what You Need

We were putting up the holiday lights on the bushes along our front walk. We were sorting through strings checking to see which worked. I was, as usual, curious, had lights that worked perfectly last year failed to work this [...]

Policy vs. Common Sense

My good friend Guillermo Fernandez, the retired General Manager of Colgate-Palmolive Mexico, would always say: "Common sense, the most uncommon of all the senses." Here is a true story to exemplify this very point. Way back when, I worked for [...]
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