Global Fastener News

Jason Bader told the Pacific-West Fastener Association to appoint a “dead stock manager” who reports to the president and has incentive-based pay.

That dead stock person – who could be part time or even a retiree – needs to study inventory performance.

Start by concentrating on the underperforming lines, he advised.  “Find ways to raise prices on slower moving items,” Bader advised.

Bader was the 2003 president of the Specialty Tools & Fasteners Distributors Association while he was with Acme Construction Supply, and is now a consultant and managing partner of The Distribution Team Inc.

• The initial place to prevent dead stock in advance is to “get purchasing people thinking like investors.  They should stop writing PO’s at 1pm and start thinking.”

“Make it hard to bring in new inventory items,” Bader told Pac-West.

Owners are the #1 buyers of what turn out to be dead stock, Bader finds.  “Don’t let owners go to a trade show by themselves.”

Another potential problem is “salespeople with checkbooks,” Bader warned.

Develop a checklist on paper for new lines: What are the expected margins of a new line?  Number of users? Competitors? Terms?

• “Your software may be able to help you identify dead stock,” Bader suggested. “What percent of your software package do you use?  What percent did you pay for?”

• What do you do with dead stock?  “Don’t rely on just one method of disposition,” Bader advised.  Liquidation possibilities include returning to supplier, bundling with good products, selling online, moving to another branch where it might sell, clearance tables and scrapping.

“Perhaps you haven’t told customers you have the items available,” Bader noted.

Even “contact competitors,” Bader suggested.

Some form of liquidating inventory needs to be monthly, Bader urged.

Start by concentrating on the underperforming lines, he advised.  “Find ways to raise prices on slower moving items.

• “Watch out for single customer products,” Bader warned. Customer-driven stock needs to be based on an agreement.  Items with long lead times need a higher margin.

“Is the customer worth it?” Bader asked

• When a customer asks for a product to be stocked, ask for money.  “If they aren’t willing to put money on it, why should we?” Bader asked.

•  Promote training on supplies and product.  “If a salesperson does not know product, the salesperson will sell on price.”

• What qualifies as “dead stock”?  “Dead stock is a fact of life,” Bader acknowledged. Each company needs to define dead stock and “be consistent with the definition.”

Dead stock might be “zero hits in 12 or 18 or 36 months.”

“Everybody in the company has to live with the same definition,” Bader emphasized.

• Bader finds 40% of inventory can be “unproductive.”

“Surplus is really more about right-sized inventory,” Bader told Pac-West.

If you don’t have four turns a year, cancel for non-stock or it is starting a march to dead stock, Bader suggested.

“There are so many things we can do internally for a 2% improvement in gross margin,” Bader said.

One place to start is to ask customers, “What do they really want us to stock?”

“And listen to what customer says,” Bader added.

“The longer we hold on to it, the worst it gets,” Bader concluded. Web: Pac-West.org