Operations Payoff

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You CAN Sell Out of an Empty Wagon

wagon wheel

FreeImages.com/Sue Byford

“You can’t sell out of an empty wagon,” is a favorite saying among salespeople, meaning that you have to have inventory (usually lots of it) to quickly serve your customers. But it just isn’t true! In fact, if you have a successful Just In Time (JIT) supply chain management process, often the less inventory you have, the better you can service your customers. Here’s why:

  • Lower inventory leads to having the right inventory in the right place at the right time – true JIT inventory management.
  • Inventory buffers often lead to obsolete inventory.
  • High inventory levels jam up the warehouse and make it harder to quickly find and pick what you want for shipment.
  • Large amounts of inventory often lead to inaccurate records, so you don’t know what you have or what you need, resulting in stock outages.
  • Too much inventory requires more storage capacity, which raises the cost of holding inventory and reduces profit.

These are just a few of the ways excess inventory hurts profits and cash flow. By running a true JIT system, you can better serve your customers and yes, you CAN actually sell out of an empty wagon.

 

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