President's Message

December 10, 2011

When One Inventory Turn is Good

Imagine if you will that you can only delivery your wares one day a year. You spend all year building off forecasts, while awaiting the one month you can take customer surveys. Then you scurry around learning what the customer really wants, wondering if you can fill those needs. After an excruciating year, at last all is prepared for delivery, but it must be NOW. Delays may mean instant losses – sometimes complete write-offs. If you’re lucky you can sell to secondary markets at cut prices. Finance would be screaming about the crippled capital. Operations would be screaming about the obsolescence. Logistics would be wondering where to store all the inventory.

 At this time of year you may think this is about a jolly old elf living somewhere north of, well, everywhere. Sorry to disappoint, but if you think about it I bet you may recognize some of these attributes of a real and tangible industry. In fact, one of the largest industries ever: agriculture. Though dramatized in the first paragraph, those who farm, ranch, fish, or otherwise work in agriculture may not feel as if the description exaggerates at all. Acceptability of the goods is as much a function of nature as it is operations management. Most crops enjoy a very limited window for harvesting. The work is very hard and demand for labor follows huge seasonal spikes and ebbs, so understandably, employees are hard to find and harder to retain.

Even if labor is available, the next hurdle is movement of inventory. Lead times for getting the produce to processing are very limited – sometimes as little as hours. We call it perishable for very good reason. Infrastructure is everything. Without it, where does the inventory go? The FDA estimates that over 30% of the food produced in the USA alone goes to waste – and almost all of that waste is in the pre-consumer supply chain.

Now consider the difficulties you have getting another 1, or 0.1, or 0.01 turns. How would you fare if much of your operations relied on factors entirely out of your control, such as weather, insects, and disease. Will you now look at your lunch plate a little differently?

It is so easy to take so many things for granted. I hope that as you enjoy your holiday meals, whether large or small, you remember how fortunate you are to have it at all. Maybe you can send a little thought to those who make it happen.

And don’t forget to leave out the milk and cookies.

 

Ed Miller, CPIM, President