subject: Inventory Control For Material Handling Distributors [print this page] Inventory Control For Material Handling Distributors
Dewitt, NY December 20, 2010: The Fourth Quarter 2010 issue of The MHEDA Journal (http://www.TheMhedaJournal.org), the leading online magazine for the forklift, conveyor, storage & handling, and general material handling equipment industries, features an article from Albert D. Bates, Ph.D., president of the Profit Planning Group, discussing how effective asset reduction programs can help improve distributor profitability, particularly in times of recession.
The article outlines the difference between two styles of asset reduction: chopping and pruning. Bates defines "chopping" as an immediate reduction in investment levels to generate cash as quickly as possible. "Pruning" is a more gradual approach to investment reductions, but one which does not create long-term profit problems.
"The reality is that most of the actions typically taken to lower investment levels are cash-positive in the short run and dangerously profit-negative in the long run," Bates writes. However, he suggests that focus on pruning can be a positive step for the company. "In pruning the inventory, firms need to de-deadify' the inventory," he explains. "This means to focus only on dead inventory in an intense effort to eliminate items that have not registered meaningful sales activity over the last year. Clearly, such inventory generates no sales volume. Converting the inventory to cash would not reduce the firm's service level in any way. It is as close to a pure cash opportunity as exists today."
To learn more, read "Chopping vs. Pruning" in the Fall 2010 issue of The MHEDA Journal Online at http://www.themhedajournal.org/index.php/2010/10/chopping-vs-pruning. The print magazine is mailed out to subscribers in January, April, July and October. The most recent issue was published on October 15. For more information, contact Chris Powers, editor of The MHEDA Journal, (315) 445-2347, e-mail: chris@datakey.org.
