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How Much Is Too Much Inventory?

How Much Is Too Much Inventory?

One thing I know is that business owners love their inventory.  Every consulting engagement I enter into always begins with a tour of the operation.  I see how the work flows through the office administration, into the production areas, and out to the customer.  The ins and outs of the business are exposed with the hope that inefficiencies can be identified.

Each owner self identifies areas of their operation they envision as the “killers of cash flow.”  They point to their invoicing and collection process, or the low billable hour employee utilization rate.  Rarely do they identify their warehouse as a problem.  In fact, it’s just the opposite.  They stand in the door with pride beaming from their eyes and point to the vast amount of options they have for their customers.  Then they say things like: “We have the best selection. Or you can’t sell it if you don’t have it.”