What is the true cost of your purchasing decisions? Hi I’m Tim Scurlock and welcome to this TXM Lean Minute.
When your buying stock and think you have a good deal consider first the consequences in terms not just of the purchase price but also the cost of holding the stock and the storage costs and the space.
Doing a deal on the price of an item you need may seem like a good idea at the time but taking a holistic view point might make you reconsider and this is even more compelling if you are in a 3PL or make an internal charge for storage.
Here, at Hazchem Safety the purchasing department negotiate a great deal on safety gloves but with a warehouse capacity of 100 pallet spaces found that as a consequence it was 17 pallets overstocked, not only does this tie up valuable capital but also takes up space for other items, preventing easy and regular access and it was affecting the pick pack efficiency.
So don’t be tempted by special deals from your suppliers if it means stuffing your facility with slow moving or unwanted goods it may seem like a bargain at the time but considered along with the money tied up, the storage space required and the double handling of goods working around the excess stock means it means its just not worth it.
Instead, negotiate longer term supply arrangements preferably with draw down agreements that way you can keep the inventory you need and not pay the price of excess. Contact us at TXM to learn more about how to improve your business culture and drive improved performance.
Thank you for watching this TXM Lean Minute.
Tim is one of our Senior Lean Consultants in the UK.