Phone: (203) 979-8867
Email: Jim Locker

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Creating Sustainable Performance Improvement

Case 5: Balance Sheet Improvement and Inventory Reduction

"Anything that is measured and watched is improved." ~ Bob Parsons, GoDaddy Founder

Situation When the 2008 recession hit, a multi-branch/state distributor of forestry equipment tied to housing construction experienced sharp revenue decline.
Background - Parts inventory increased over the years as new equipment was introduced and older equipment was phased out
- Excess parts were not returned to the supplier and became obsolete
- Excess parts in one branch were not stock-balanced to other branches
- Order quantity for active parts was not sufficiently monitored
Analysis & Action:

Our Process
- Met with senior management and the firm’s software system provider to assess viability of the inventory management software; we determined that it could be a workable software if used properly
- Conducted analysis by branch: sales rate, min-max, monthly sales, etc.
- “Reset” parameters by considering part sales rate and OEM order rules
- Established procedures for exchanging overstocked parts between slow and active branches
- Helped obtain some credit with OEM suppliers for slow/obsolete parts
Result Reduced overall parts inventory by $1.75M, increasing turns from four to seven in six months, without any negative impact on sales.