The managing director’s perspective

Home Inventory optimisation The managing director’s perspective

When you want to focus on the strategic direction of the business, the last thing you want is to be distracted by what seems like constant firefighting on the operations side.

At the same time, you’re only too well aware of how operations – and the inventory in particular – can impact customer service and profitability.

You thought that your recent investment in ERP would be paying off by now, but ROI is unclear and there still seems to be too many of the old problems.

In today’s competitive environment you’ve seen other businesses go under so you’ve got to do something to reduce your risk and manage the expectation of the rest of the Board and the shareholders, including communicate with them effectively and succinctly.

Why is this whole inventory thing such a problem? Why can’t you just get it under control?

After all the FD seems to think all you have to do is reduce inventory by 10%. Just how hard can that be?

How we have helped others

The MD of one global aerospace company was under pressure from their parent company to achieve an increase in stock turn from 9 to 11.

When we did our analysis we identified that there were legacy parts of the business where the turnover was quite low and in order to increase it they would have improve the underlying business processes.

Another part of the business comprised new products and there the turnover was very high, although the proportion of sales was relatively low.

Here the business processes were newly designed and robust.

We were able to show that the problem lay in the balance between the legacy products and the new products.

It was no longer viable to invest money in trying to improve the processes behind the legacy products because it would be better to invest this money in marketing the new products – so moving the focus of the business.

And by switching this focus from legacy to new products, the turnover would just follow.

This helped the MD address his business strategy and also helped him work out how he was going to respond to the parent company. He was able to explain why he wasn’t going to achieve a turnover of 11 in two years time, but that he would be able to do even better than that in three years time.

How we can help you

  • During our time working with you, we help everyone understand how the different parts of the process impact each other – finance, commercial and operations. This makes your team much more resourceful, requiring less remedial intervention from you.
  • We identify the strategic decisions you need to address and help you clarify the options and find a way forward.
  • Our extensive experience means we understand how businesses like yours really work, and therefore our recommendations are practical and actionable and we can help you make them fast.
  • We can show you where to focus future investment to maintain a continuous improvement trajectory.
  • We help you explain what you need to explain to those to whom you are responsible and with whom you need to communicate – your shareholders and parent Boards, your fellow directors, your senior team members and their staff.

More case studies

Read more case studies in ‘Inventory Management: Advanced Methods’ (Kogan Page, July 2015) written by Geoff & Catherine. Exclusive discount available through this site.

Next steps?

Read more about how our consultancy services can support your business or find out about training routes for you or your team? Or give us a call on 01386 710 110