Inventory Turns – Somebody Pays

Recently we touched upon blanket orders. Today, we are going to look at them specifically as to how they might relate to inventory management.

So, my favorite cautionary snippet warns about “Not shooting pool with anyone who’s first name is the name of a major city.” To an extent, there is wisdom in that. Unless of course you’re THAT GOOD! And, most of us are not.

When it comes to the idea of keeping steel in inventory, there is another snippet that suggests; “Better that you be stuck in an elevator with 50 first graders with fevers, ice cream cones, and intestinal flu, than hold steel bars as inventory.” Doesn’t seem to leave much room for any discussion. Just don’t do it, at any time, for any reason. That used to refer to slow-moving inventory. Today, however, it seams to refer to any inventory, no matter who you are; service center, end-user, manufacturer.

In a nutshell, no one is to maintain any inventory, but everyone is expected to ship their products next day. In reality, that philosophy results in what I refer to as “kick the can”. Someone has the inventory somewhere; we just want it to be someone else’s expense. Inventory is a necessary evil then, so long as someone else is carrying it. Or, as an old and dear friend of mine would always say; “Somebody pays!” Just move the actual mass of hard steel down the line until it is not so visible. BUT, how many decision makers do you want to be between your “Just-in-Time” company and availability of the actual goods? There is no avoidance; to deliver products with the speed expected today, most of us should actually maintain some inventory (that includes end users, manufacturers, and even service operations). We just need to insure we are capable of managing that inventory with a competence that approaches an art-form level.

Heavy industry is alive and well. Globally, there is a big need for digging, busting, breaking, grinding and pushing; dirt, rocks, yogurt, whatever. Service centers are tasked with anticipating the needs of that industry months or years ahead of potential orders. No easy task. End users, however, may witness repetitive usage of materials within somewhat predictable cycles. They enjoy a level of “forecast insight” that steel service centers would love to have, no matter how slight it might be. Yet fewer than you would imagine utilize the benefits of a useful and available inventory management tool; “Blanket Orders”.

Committing “forward”, to a dedicated source of supply, for a dedicated quantity of material, may be facilitated by using a blanket order. Not a bad compromise that protects continuance of supply and improves cash flow.

-Howard Thomas, January 21st, 2020

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