A recent article over on CFO, which states the obvious, says that big lesson from the downturn is to cut inventory, not people. The timing of this is so poor it’s shocking! Why couldn’t they have run this *before* organizations cut so many people that joblessness came close to reaching an all time high: 10.1 in October of 2009 compared to the all time high of 10.8 in November of 1982! (Source: The Misery Index)
As noted in the article, there is a huge savings potential in inventory reduction, which ties up working capital, eats up storage fees, and risks significant losses from obsolescence if the product is not sold before it nears the end of its useful life. In fact, I’m willing to bet that if the right end-to-end inventory optimization strategy was employed, the average mid-sized company (10M to 500M in revenue) would save significantly more than the 520K saved by the average company in the report. But still, even if your company only saved the average amount from its inventory reduction effort, it would save 30% more than the average savings the average mid-sized company obtained last year by slashing headcount. Headcount which you need if you’re going to recover when the economy picks up — because if you’re regularly turning away business like the contractors in Pittsburgh, eventually word is going to get around that you’re not interested in new business and then, because potential customers stop calling, you’re going to stop getting new business. Instead of growing, you put yourself on the fast track to bankruptcy!
So cut your inventory, optimize your working capital, and spend more strategically. Not only will you save more, but you’ll make more too when times are good!