From Smart Inventory Solutions: 7 Actions for MRO and Indirect Inventory Reduction
Inventory: The Forgotten Investment
Inventory management is one of the most important disciplines in almost every company. Inventory can provide the capability to fulfil a customer need, repair a broken machine, assemble products for sale, or just keep production going. Yet, inventory management is widely perceived to be one of the most boring management topics there is. Mention inventory management to most people and almost immediately their eyes begin to glaze over. In fact someone once suggested to me that this manual should be called, Inventory: More Exciting Than It Sounds!
However, consider this. For most manufacturing organizations, inventory can account for up to 50% (or more) of the current assets of the business. This means that for most manufacturers, up to 50% of their assets that could be converted to cash in the next 12 months are tied up in inventory. For retail and wholesaler businesses, the figure is even higher. However, unlike cash, the money tied up in inventory is not available for any other use. It cannot be used to fund the business or for further investment in other productive assets. With MRO inventory this is doubly so as the inventory is not purchased with resale in mind. Nor does inventory represent a defined future stream of income like receivables. Inventory ties up cash and little can be done with that cash until the inventory is sold or moved.
For many people though, inventory isn't a serious business topic. Inventory is something that accountants count and store's...
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