GIVE ME TWO HOURS AND I’LL SAVE YOUR INVENTORY

Retailers and their suppliers still have time to save millions of shillings this Christmas by some easy do-it-yourself improvements to their sales and operations planning.

According to Rob O’Byrne, a specialist in supply chain management, it’s time to begin ironing out the traditional year-end logRose of stock and deliveries. His target is for retailers and their suppliers to aim for a 20 per cent reduction in their inventory investment to avoid stock-outs at one end of the scale and shelf-dead items at the other.

“Eighty per cent of companies from retailers all the way upstream to their suppliers and their manufacturers would see significant bottom-line benefits from simple improvements to their sales and operations plan,” he says.

“Some of your greatest breakthroughs will not come from rocket science but from more careful attention to basic things.”

“Give me or any other logistics expert two hours with your S&OP and I’d expect to show you opportunities to save 5 per cent on your inventory investment. The next big gain after that may need a lot more work but who would complain about 5 per cent?”

“The first big step is to train your sales people to give accurate forecasts and to be prepared to stand by them. That means measured forecasts rather than mere predictive guesses.”

“If they are too optimistic you get stock overload, too pessimistic and you lose sales from stock-outs.”

“They are what cause the Christmas chaos behind the scenes – huge stock and deliveries peaks, sharp sales peaks, long labor hours and congested deliveries. Santa is out front and smiling but upstream the suppliers are jumping through hoops and owners everywhere are going through the annual agony and complaining how slow business is, then how it may be picking up, and finally they’re too busy with what they hope is their best Xmas ever!”

It is a problem highlighted at Christmas when many retailers hold up to three months’ stock – an estimated national total of Kshs 10 billion sitting in warehouses round the country.

The 5 per cent potential inventory saving of that is Kshs 500 million. Saving 20 per cent on that would be Kshs 2 billion.

“Most companies don’t undertake effective S&O planning at all,”

The actual fix, Guru Logistics Group’s formula to produce the what-to-do information, is a three-part process:

1. Review and categorize your inventory into fast, medium, and slow-moving products – As, Bs, and Cs.

2. Begin by focusing on improving management of your A lines

3. Create a system for making sales forecasts measurable and not just sales team guesses.

Classic symptoms of poor S&OP are:

? Lost sales through stock-out

? Zero stock of popular products

? Excess stock of slow-moving products

“Sales and Operations Planning breaks down the barriers and does away with silo management.”

“The result will be that you do away with both stock overloads and stock-outs. Which just happen to be the two main symptoms of supply chain chaos at Christmas.”

Godfrey Otiato

Founder- Guru Logistics Consultancy