Your Surplus Inventory is on Fire!-Presentation

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Bill Mayes, from Mayes & Calero LLC, discusses the issue of surplus inventory in the machinery industry and provides strategies and tactics for reducing it. Surplus inventory refers to parts that are either excessive in quantity or have not been sold in 18-24 months. Parts managers often struggle to get rid of surplus inventory due to budget constraints and emotional attachment. However, Mayes emphasizes the importance of treating surplus inventory as a fire in the warehouse, pushing managers to do whatever it takes to remove it.<br /><br />Mayes mentions the concept of a balanced dealership, where parts and service departments should be the most profitable in order to improve market share and customer retention. He identifies six major challenges that parts managers face, including obsolescence, wrong mix of parts, excess stock, marketing, computer system technology, and distribution changes by OEMs.<br /><br />To overcome these challenges and manage inventory more effectively, Mayes suggests implementing good processes. This includes understanding the life cycle of a part and making decisions such as when to begin stocking a part, how much to stock based on demand, and when to phase out parts. He also highlights the importance of inventory carrying costs and the impact of replacing non-moving inventory.<br /><br />Mayes emphasizes the need for a customer-focused approach, where customer satisfaction and increasing throughput in the service department are the primary goals. He discusses the financial impact of surplus inventory and suggests strategies such as reworking or substituting parts, salvaging them for cash at a reduced rate, and ultimately getting rid of them if necessary.<br /><br />In the new world of just-in-time inventory management, Mayes advises running operations like a factory, utilizing strong processes for expediting parts, and focusing on the service department. He concludes by urging managers to take action and put out the fire of surplus inventory before it burns their profits.

Keywords

surplus inventory

machinery industry

reducing surplus inventory

parts managers

balanced dealership

major challenges

obsolescence

inventory carrying costs

customer-focused approach

just-in-time inventory management