Taking stock - it’s not always about inventory

Knowledge fuels business with insight just like inventory fuels effective logistics with customer service - they share similar principals and habits worth remembering to be effective.

In customer service, finding stock is out or misplaced is a service failure. Even if you find it minutes later it could be too late and the sale has gone. Or when you last needed a critical piece of information to secure a deal or support a key decision, but struggled to retrieve it - then remembered an hour later... too late, the deal evaded you. The latter is life’s lesson on experience - you know - understanding what you needed to know, 30 seconds after you needed it. You won’t forget it the next time.

So why is it, after years of customer service failures, so many professionals still forget to use the principals of Inventory Control to get it right? Perhaps comparing these to the management of knowledge will help commit them to memory.


Stock: We keep stock to buffer uncertainties in our plan - supplier delays, demand peaks causing forecast inaccuracy, production batch size and completion timing. We do this so we can pick available items from stock to supply customer needs. We make or buy stock as needed from suppliers or our own production.


Warehousing: We use warehouses to keep the stock we need in an organized way - layout, defined rack and bin locations, fast-movers nearer the dispatch point, and slow-movers in the back.

With knowledge we also get “stock” in chunks from our own experiences, books, articles and the Internet. When we need specific stock we read relevant articles, and store this in our brain/memory, But without regular retrieval, this knowledge goes to the back and requires more effort/thinking to surface. To build knowledge inventory that aids retrieval, we store books on organized shelves much like a warehouse. Or we store knowledge electronically in memory on disks or chips. This is the same as putting stuff in a storeroom to get it out the way but still “available”. Without better organization/access, retrieving the right stuff is problematic. So electronically or digitally - we structure data (the stock items) into Info-Cubes or Data Marts (the Bins) within a Data Warehouse to facilitate rapid, relevant retrieval.


Stock Mix: Stock is held to protect customer service from plan inaccuracies and market variability. So we hold more stock of items subject to more variability. Not quite. We should hold more stock cover (in days of forward demand/usage) of these items relative to the more predictable. Understanding stock quantity v cover is critical. Cover is a factor of customer service plus related safety stock planning. But, if you set service at 98% for every item, slow movers will eat working capital (the money we have for stock) and we may not afford enough for fast-mover cover (the ones we make most revenue from). This is the effect of Stock Mix - a key area to get right. If not you’ll have too much of the wrong stuff  which becomes dead stock you write off and too little of the right stuff - result horribly poor service or additional working capital investment for extra stock.

Apply mix to knowledge. Focus too much on one area of limited business interest could waste effort in balanced, effective business execution - or it turns you into a guru/specialist if people need your info. Or you may become an intellectual recluse (a scrap merchant) if they don’t.

Perhaps it’s time we checked our knowledge EOQ and MRP process since - let’s face it, stock, like knowledge, only has value when you need, use it or apply it. Plus availability and rapid retrieval when needed maximizes the effect of both.

Contributed by: Doug Hunter, Head of Product Services, Syspro