The Numbers You Need to Know: Availability

There’s an outdoor mall (lifestyle center) near me that has built a massive parking garage structure and digitized its parking availability. When you pull in, there’s a board that lists the floors and how many parking spots are available on each. As you ascend the structure, you can clearly see a red "X" above every parked car. This makes it really easy to find the green marks and know where you can park without having to have your eyes float back and forth as you’re driving in narrow, two-lane traffic where it’s usually a bit dark.

The parking garage is providing you, the customer, with promised availability of its inventory. It takes the angst out of how far you’ll have to drive to get what you want (a spot). You know exactly what floor you’re going to need to go to in order to find what you’re looking for. It makes sure they don’t oversell what they have. It modernizes an industry that badly needs it. And, lastly, for my part at least, I feel a bit better that the people that built the structure are still investing in it; maybe that’s my false sense of security.

PROMISED INVENTORY

Do you have a good system to track promised inventory for both the raw materials and goods you are using in production and the ones that you have made? Often, the system to track the one can’t help you with the other, but an accurate count of finished goods inventory is critical if you want to make sure that you sell what you have and not more. It also opens up a world of possibility for you in terms of profit.

too much inventory?

If you don’t know what you have, how do your salespeople know what to sell? How do you know whether you can discount something because you have too much of it or stand your ground because it’s a difficult commodity to get and you also have only enough to keep the price firm?

An accurate count of current physical inventory of the product that you sell or provide to your end customer is just as important as an accurate count of the materials you use to make it. We would usually take that one step further and tell you that it’s equally important to know when and how you made the inventory so you know what to sell first (FIFO) or at what price (based on the fluctuation of material costs). These things are critical to know in order to know that you’ll be profitable.

what you have

You need to project a little further. You should be able to track the make and use of all finished goods inventory. How much did you make over a certain period of time and how much do you still have left? Turnover of finished goods inventory is difficult if not impossible to track in an ERP or financial system as you don’t have the records of what you made and when. The performance of these jobs is equally as important as the physical inventory count, but only if you have a system that can do that for you.