Who needs efficient stock management and why?
Effective inventory management is a significant tool for increasing net profit, positive net cash flow for an average and large enterprise producing tangible products. What happens if you think and do otherwise?
The history of this article is not thought out. My mobile and female voice rang at the other end of the line, saying that an enterprise producing important products for rescue services urgently needs to train one employee on the subject of stocks. The caller was called the HR Director of one of the industrial enterprises, considered one of the world leaders in her industry. Answering her questions about how “Business Consulting Igor Chugunov” can help in solving this task, and when I heard “well, then I will send an application for training,” I was interested in the question of the main reason that made me an enterprise interested in learning inventory management.
What does the “ongoing economic recession”? Given that this is a common practice of our enterprises: in the case of a drop in income due to a drop in demand, the reduction of expenses should start with personnel costs, including expenses for training and development of personnel. This is the easiest obvious way … to push even more problems into the future. Unfortunately, human resource management in many domestic companies does not belong to the main functional areas of the enterprise, judging by the costs of personnel training, but rather refers to servicing people: to accept / fire people to work, keep personnel records, organize a corporate holiday, etc. From here, people cannot qualitatively solve standard management tasks, for example, how to make a large net profit and increase the amount of money from an enterprise without increasing debts. Without high-quality training in what is primarily necessary in business for an optimal increase in net profit, positive net cash flow and the market value of an enterprise, this does not work. This is the “as is” situation.
Find the site of this well-known in its industry of the enterprise was not difficult. Well knowing that the consumer is driven by his current needs, I carefully studied the information on the site and found the main reason that made the management of this company come to understand the need to send an effective inventory management to the head of the procurement department.
The key word here is “effective inventory management.” In it the main meaning is carried by the adjective “effective”. The fact is that without stocks in business, as a rule, nothing happens. A stock is a necessary form of material flow, without which the activity of an industrial or commercial enterprise is impossible, as the vital activity of a living organism is impossible without a blood supply. All companies have stocks in one form or another. They are necessary so that the workshops of an industrial enterprise produce the necessary semi-finished or finished products, in turn, the stocks of finished products and goods are needed to enable their timely delivery to customers. The fact that the enterprise has stocks of raw materials, materials, components, work in progress, finished products, goods, spare parts, tools causes the need to manage them. At the same time, management of these stocks in actual management practice in the minds of managers is quite far from the expected net profit, which materializes in positive net cash flow, and therefore in many cases remains just inventory management or just material and technical supply. With this approach to enterprise management, such management also remains simply a management, the financial result of which is calculated by the accountants and financiers using the “chickens until the autumn they consider” method: what is calculated is what will happen.
In addition to simply inventory management, which can be called inventory management “As is” or “How it happened” or “Something like that”, there is also effective inventory management, which should be called “How to” or “So it is necessary for an optimal increase in net profit, positive net cash flow and market value of the company. ” The philosophy of effective inventory management does not come from the fact that there is nothing without reserves, but from the fact that any business activity must be a profit generator, including inventory management. Complicated activities can always be hierarchically consistently structured into its constituent activities and done hierarchically consecutively several times. Any elementary activity must be a profit generator. To do this, each elementary activity should be proactive, i.e. long before the accountants and financiers calculate the financial result, set up to generate net profit. And if this is done, then there will be a large net profit and there will be big money.