Tag Archive for: Inventory Control

Goals and Targets

Today marks another guest post from Steve Day. Steve received a degree in Electrical Engineering and then served in the US Navy. He started with Komatsu America 1978. For the next twelve years Steve worked through various equipment sales positions before becoming the Vice President of Parts, Vice President of Service. During this period Steve sat on the board of a major distributor in the North east US as well as Hensley Industries. After twenty-five years Steve moved from the OEM side of the business to the Distribution side by joining Tractor and Equipment Company in 2003 as Vice President of Product Support. In this piece he is walking us through goals and targets.

Throughout his career Steve has learned the Industry from the ground up. This allowed him to have a very clear view of what was needed to support customers, employees and owners in their pursuit of excellence. Working at high levels in both the Manufacturing and the Distribution side of the business gave Steve some great learning opportunities and chances to develop insights.  Steve retired in January of 2020.  After spending 40 plus years in an industry we are very pleased to be able to share some of Steve’s insights with you and honored to consider Steve a friend.

Here are the areas that I think a manager should focus on and continually question his inventory management about.

“Goals and Targets”

I like to have Companywide and branch targets for the following:

• Over the Counter fill rate for each branch and for the company for stocking parts by manufacturer.
• You want to see your fill rate on parts you stock and your total fill.
• You are going to want to see this monthly.
• Turns by manufacturer. You can measure this by annual turns or weeks on hand.
• This is how you will know how your money is working. This is a big issue with me.
• If you have a smaller manufacturer with low turns and low parts margins then you better be making lots of money when you sell the machine. Otherwise I would rethink the relationship.  Time is money and I don’t like spending time unproductively when I can allocate time and money to more productive areas.  That sounds cold doesn’t it.
• Monthly
• Emergency and Critical order charges by part number.
• Weekly (otherwise it is too hard to get your arms around). This is helpful in deciding if you need to add some parts to stock and also gives you an idea of some problems your manufacturer might be having with availability.  It lets you act early.
• Parts being expedited.
• You want this daily. Set a target for you inventory group to be expediting parts that you don’t have an acceptable delivery date on each day.  Split it between customer orders and service department orders.  If you get this right, it will change your company.
• Your goal (this is a “Ron Sleeism’s”) is to have an answer on every part being expedited every day. Like many goals it is probably impossible to achieve most days but it will drive far better customer support.
• Stock order parts being expedited.
• If you lose track of how your stock orders, special marketing orders and other specialty categories are being fulfilled you set yourself up for some trouble down the road.
• Don’t ever assume that suppliers are going to hit their lead times. If you don’t track stock order fulfillment you can easily run out of fast movers and kill your availability. Run this report at least weekly and you will save lots of heartburn.
• Reports on specific manufacturer marketing programs.
• There are real opportunities to make money if you manage your inventory and utilize manufacturers marketing programs. Take advantage of discounts.  You won’t know what you are missing unless you track it.
• Additionally, manufacturers look at how well you utilize programs.
• If the program doesn’t work for you, talk to them about it. Often, they will modify it to fit your needs.  If you ignore them, they will think you don’t care.
• Non-stocking parts by part number.
• I will talk about this in detail later but you should have a list of every non-stocking part in your inventory and another report showing every non-stocking part that has been on a non-invoiced customer ticket for more than a week and on a work order for more than two weeks. This is a critical report.  You want to constantly question these parts.  Call the branch service manager or parts manager and ask them why the part has not been invoiced.  Keep the pressure on with these parts.