What are the issues with Inventory Management in SME’s ?
• Inventory not reconciled with books
• Different software for accounting & inventory
• No period physical verification
• No system of recording of Work-in-Progress
• No ERP or ERP not implemented effectively
• Unplanned procurement and production
Why Inventory Management & Control is most critical for SME’s ?
• Real profitability is always unknown
• Product costing is always assumption based – without actual data of yield & scrap
• blockage of working capital – Inefficiency leads storage / interest / cash flow impact
Who is responsible for poor Inventory Management in SME’s ?
• MANAGEMENT is responsible – Since Inventory controller / process owner: not define
• Business Development team is responsible for inaccurate forecasting & production planning
• Purchase team is responsible for unplanned/ excess purchasing
When does problem starts and becomes critical ?
• In the initial stage the inventory is closely controlled by the promoters
• In growth phase – stock level starts multiplying, various departments start evolving and responsibilities are delegated to different people – Inefficiency and control issues crop up
Where are the control gaps ?
• Re-order levels, base stocks not defined
• Lack of maker checker system – SOD’s
• ERP’s implemented with no process studies
• UoM for Inputs & Outputs are different
• BOM (material & Processes) not defined
• Slow/ Non-moving items – no ageing process
Stay tuned for How to Improve inventory management