Inventory Accounting | Inventory Management header graphic

Inventory Accounting | Inventory Management

People are always searching for best practice , somehow believing that there is a silver bullet solution that will cure their inventory problems. The problem, of course, is that what is best practice in one country/industry/business might not be best practice in another. In any case, the exalted best practice might just be too much of a jump for many people to take or indeed may not be economically viable.

Interestingly, though, in my work, the question that I am most often asked is, what do I do with all of this excess inventory? My answer, of course, depends upon the nature of that inventory, what it is, how old it is etc. But obviously the best thing to do is create less of the inventory in the first place!

Some might think that this requires best practice and is therefore difficult to achieve but I would argue that this really is more achievable than people think. Putting in place the right processes, polices, measures and reporting in order to limit inventory purchases to those items that are most likely to be used/sold and in the right quantity, is as important or perhaps a more important task than clearing out the old stock. This can be achieved by understanding what works well for others rather than what is best practice. I think of this as better practice.

With that in mind I recently had the opportunity to interview more than 30 people, across a dozen companies, in all Australian states and New Zealand, who were all associated with inventory creation in one way or another. There were General Managers who make the occasional big decisions that create inventory. There were inventory managers who take the day-to-day actions. There were purchasing people who order the stuff and sales people who provide forecasts. Each of these people has a role to play in the creation of inventory but interestingly only the inventory managers acknowledged that role explicitly. The result of those interviews does not constitute best practice but I think that they give some insight into better practices.

So, assuming that you want to improve your inventory results the only thing stopping you from adopting some or all of these actions is the fear of either change or loss of control. Of course you could just keep looking for best practice but now that can only be seen as an excuse to do nothing!