How to Learn from Your Surplus Inventory "Backstories"

Categories: Inventory Management

By Mark Tomalonis
Principal, WarehouseTWO, LLC

“Those who cannot remember the past are condemned to repeat it.”

George Santayana (1863-1952)

Do you apply this adage to your surplus inventory?  Have you learned anything from your past purchasing/inventory management mistakes?  And, as a result, have you changed your policies, processes or training as they relate to your company's purchasing and inventory management activities?

Here are three simple steps to avoid repeating your most egregious purchasing/inventory management mistakes.

Step #1:  Identify Your Worst Surplus Inventory…and their “Backstories”

Here’s a simple exercise that your inventory manager and CFO should do together:

1. Identify every item in your inventory that you consider to be “surplus”.
   
   
2. Rank this list of items by decreasing line item value (equal to original unit acquisition cost times quantity available in stock)
   
   
3. For each of the top 10-20 items on this list, ask yourself this question: “Why do we have these in stock????”

I bet that, without thinking too hard, your inventory manager and/or CFO will clearly recall why you own these biggest purchasing/inventory management mistakes.  The “why” is each item’s “backstory”.  Yes, each of your surplus items has its own “backstory”.  Just like a superhero!  Sadly, your surplus items’ backstories are not nearly as entertaining as those of superheroes.  But you should still learn from your surplus items’ “backstories”.

Step #2:  Memorialize Your Purchasing/Inventory Management Mistakes

To prevent your worst purchasing/inventory management mistakes from recurring, memorialize them, by writing down each one’s “backstory”.  Include these details:

• Part number
• Supplier
• Purchase date
• Why the item was purchased.  Be as specific as possible.  For a specific client?  (Who?)  To meet contractual requirements?  As speculative inventory for forecasted sales?  Data entry or software system error?  To take advantage of a supplier’s special offer?  Purchased as part of assets from an acquired company?  Include details.
• What, if any, changes has your company made to policies, procedures or training to prevent this mistake from recurring?  Reference specific policy/procedure/training documents.

Compile these “backstories” into a single document.  Update it annually to include new, painfully expensive purchasing/inventory management mistakes.

Step #3:  Include the Retelling of Surplus Inventory “Backstories” in your Employee Training

Now that you have created a “backstory” document memorializing the “why” behind your 10-20 worst surplus inventory mistakes, use it as a training tool.  Require that every one of your employees who is empowered to create a purchase order or inventory stocking plan read this document.  Better yet, discuss each “backstory” during group training.  Encourage the trainees to suggest other ways to prevent these mistakes from recurring.  Update your policies, procedures and training standards to incorporate their best ideas.

A Tip on Increasing the Impact of Training

Staff training can be a lot of things.  But mostly it is tedious, inconsistent and too infrequent.  Retention of information is fleeting.  But there’s a little trick to improve training retention.  To increase the impact of a specific training topic, such as retelling your surplus inventory “backstories”, follow these steps:

1. Print out for each employee what you want him/her to retain.
   
   
2. Provide to each employee a copy of the document.
   
   
3. Have each employee sign, date and return his/her copy.
   
   
4. Store the signed/dated copy in the employee’s employment/HR file.

Employees are much more likely to take something seriously if they have to sign it.  Granted, this process is a little ritualistic and intimidating.  And you may never do anything with these signed documents.  Still this “signature required” process can be very effective in increasing training retention.

What are you Doing About your Existing Surplus Inventory?

Having freshly identified your worst surplus inventory offenders, what are you doing to get rid of them?  Click here for suggestions.

About the Author
After a successful career in sales and operations management in the wholesale-distribution industry, Mark Tomalonis is now principal of WarehouseTWO, LLC.  He amuses himself by writing articles such as this one, to help wholesaler-distributors execute their operations better.  Mark’s articles and tips are published in WarehouseTWO’s monthly e-newsletters.  Click here to subscribe.


About WarehouseTWO
WarehouseTWO, LLC is an independent “inventory-sharing” software tool created exclusively for durable goods manufacturers and their authorized distributors, and for any group of durable goods “peer” wholesaler-distributors, such as members of a buying/marketing group or cooperative.  To learn how inventory-sharing with WarehouseTWO can help your business, visit the WarehouseTWO website, or email info@warehousetwo.com.