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Making obsolescence obsolete.


Obsolescence. Does hearing the word make you shudder? In our experience, inventory obsolescence is the most common issue impacting organizations of all size, big or small. An inventory write off of any size gains considerable attention on account of the impact on cash flow and the balance sheet.



Shawn Casemore
Shawn Casemore
Fortunately there are solutions for reducing and managing obsolescence, most of which don’t require capital investment or the integration of new technology (now that thought likely made you shudder!)

The best approach in reducing obsolescence is first determining cause. The cause of obsolescence can be bucketed into one of the following five categories.

1. Demand.
2. Policy.
3. Process.
4. Shelf life.
5. Life cycle management.

Over the coming weeks we will discuss the impact that each of these areas can have on obsolescence, and how to best overcome or avoid their impact.

To begin, however, it is first important to determine which of the preceding five categories may be influencing obsolescence in your organization. To pinpoint the potential cause commences with asking specific questions. Ask yourself the following questions to determine which of the influences apply in your specific situation. The questions are aligned with the five areas of influence; therefore an answer of “yes” to any question below will identify the area(s) that may be influencing your obsolescence issues.

1. Forecasts have historically been less than 75% accurate.
2. Procurement policy doesn’t consider inventory as a component of total cost.
3. Buying decisions are focused on reducing the transactional cost.
4. Your market consists of erratic life cycles.
5. Products have a defined shelf life.

Next week we will discuss the impacts of poor demand forecasts on obsolescence and how to overcome.

Supply Strategy Quiz:

Your action for this week is to answer the questions above and determine your most prominent inventory obsolescence drivers. With this information top of mind you will be prepared to begin discussing strategies to reduce if not eliminate obsolescence all together. Stay tuned for next week’s edition!

Last weeks quiz response:

The network of partners used by a freight forwarder are extensive, and the steamship lines or airlines (depending on the mode of travel being used) carry the greatest power in the relationship, and rightfully so. Unfortunately these parties prefer to deal directly with forwarding agents (not companies), thereby adding an additional layer of complexity and price to the equation. Your best option (in this example) would be to start by requesting the forwarder provide their contact at the steamship lines in order to discuss the pricing issue directly. If the forwarder becomes squeamish, there is a good chance the pricing is not a direct pass through. If after speaking with the steamship lines you are unsuccessful in negotiating a reduction in the ancillary charges, you can then make a determination as to whether pursuing a new relationship would be of value relative to the additional costs incurred. Keep in mind there are more forwarding agents than their are steam-lines and airlines, so if you have a trusting relationship with your forwarding agent, engage them in regaining your confidence relative to pricing stability.

Shawn Casemore, President, Casemore and Co.
www.casemoreandco.com

Making obsolescence obsolete.

Mercredi 29 Août 2012
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