Most buyers don’t get fired because they have too much inventory, but they can get into hot water if a distributor suffers too many stock outs. That leads to an overall tendency in most distribution organizations to overstock. In our experience, as many as 99% of distributors are overstocked, many of them dramatically overstocked.
Master distributors typically import their product in bulk from overseas vendors. Unless your products are light enough to ship economically via air, you probably get them shipped via boat. This translates into a 3 to 4 month lead time from the time you place a PO until the product is at your warehouse.
Most companies develop plans and goals each year to improve inventory performance – their inventory turns, reduce their inventory by x dollars, reduce lost sales by x percent… but they have difficulty each year actually achieving this.
Historically, one of the biggest challenges facing wholesale / retail companies looking to invest in a system to improve their inventory has been getting a solid return on their investment. And let’s face it, no one in their right mind wants to invest the money and time (and go through the disruption a new system creates) if they are not confident that the return will be well worth the effort.
All inventory decisions for wholesalers and retailers begin with some estimation of future sales (ie. forecast). Improving the accuracy of that forecast has a direct and significant impact on inventory profitability. Inaccurate forecasts have a heavy cost in lost sales, excessive stock, and bad decisions based on faulty estimates of future demand.