Inventory as an outsourced activity

In our previous article, we wrote about the obligatory and useful features of quantitative stocktaking and the methods for providing control over inventory management, ensuring strict continuity (the post “On Inventories in General”). We will now discuss an alternative method.

Due to the obligatory nature of the task, its importance is cardinal and is practically essential for operations. Still, the inventory activities of companies seem to indicate that they do not devote suitable attention to the possibilities of developing quantitative stocktaking. Why, you ask? Maybe because they only do so once a year (at best), and so the activity does not reach the threshold level where additional resources would be allocated to developing the activity. However, when performing a task that requires the simultaneous cooperation of tens or even a hundred people, there is always a couple percentages of productivity in reserve. Let’s see how these reserves can be utilised.

In light of the fact that the activity is specialised (and is not necessarily a part of the company’s everyday activities) and requires a relatively high level of workforce resources, it is expedient to designate specialised groups that deal only with this specific task, although this requires a certain size of company (to make it economically feasible), or to contract a specialised company (outsourcing). Let’s take a look at these possibility in detail.

 

What is it worth having others do?

It is usually not worth outsourcing the activity that is the company’s main activity (because the goal of every company is to be the best at what it does in its main activity – which is also true for the specialised inventory service provider). This provides a possibility for devoting more concentrated attention to those of the company’s activities that result in revenue and profit.

 

Designation of a specialised team

It is worth designating a specialised team if the network to be inventoried is of suitable size (hundreds of smaller stores or tens of large stores/warehouses). In this case, you can continuously maintain your inventory team as they will always have tasks to perform, and the team may be justified from a purely financial aspect. This allows the development of the quantitative stocktaking process, as the process will reach the threshold level mention above.

But what is it that we have to face?

  • the inventory team and the employees subject to their control will sooner or later get to be on friendly terms, damaging objectivity,

  • an asset park is required that makes it possible to perform the inventory process, which is a cost that does not necessarily serve direct value creation,

  • the expenses devoted to inventory are not necessarily clearly manageable.

 

Entrust a specialised company

The essence of this scenario is that since the inventory task is performed by a company whose core activity is inventory, it is able to perform the job more effectively and possibly in better quality than the customer. This leaves the company with more available capacities that it can dedicate to developing its own core activity.

As the service provider is able to perform the outsourced activity more effectively due to its specialised nature, this step may lead to significant cost reductions. What’s more, an important advantage of outsourcing is that the inventory costs, which may have been hidden, will become transparent thanks to outsourcing, which is a key element in financial plannability.

Additional advantages of outsourcing include:

  • the inventory activity appears as a one-off, manageable cost (instead of adding to the row of “other costs”)
  • the company gains an objective overview of stock levels, which is essential for specialised companies (the stock is checked (inventoried) by someone other than the person who manages it during the year…)
  • the service provider performs the inventory at the time most advantageous for the customer (e.g. at night), so the customer does not have to use the “Closed for Inventory” sign
  • we assume the costs of maintaining and updating inventory software and data collectors
  • we are always thinking about how the inventory can be made more efficient
  • your employees will be able to focus on their main tasks (for example on sales in a store, on picking in a warehouse, on process development, etc.), which increases customer satisfaction
    • you don’t have to worry about special work schedules
    • you don’t have to ask for favours
    • you don’t have to issue vacation days for the time of the inventory
  • we filter our foreign/un-invoiced goods handling
  • every single product is entered into the inventory, because a specialist is not influenced by day-to-day routine.
  • we provide customised and detailed stock values
  • we do not affect the performance of day-to-day tasks (we play the role of an unnoticed supplier)
  • for a specialist, precision is essential (!).

 

By: Dorina Mentés & András Takács