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Transforming Inventory Turnover from Disastrous to Impressive: A Game-Changing Strategy

April 1st of our groundbreaking project, the Global Inventory Turnover Breakthrough, was anything but a fool's errand. Our mission was to skyrocket our Inventory turnover from a miserly 6.3 turns to an astounding 8.6+ turns within the year. It was something our company had never attempted, never even dreamt of.

But we had the drive. Our dismal inventory turnover topped the industry for all the wrong reasons. Our cash was being drained by a monstrous inventory, and it created unnecessary expenses in handling charges. And this was taking a toll on our Return on Invested Capital, making it an unattractive prospect for potential investors. To top it off, employees would grumble that despite the mountains of stock we never quite had the right materials they needed for their work.

We were fired up to turn things around and write a new story. Little did we know, we were about to write industry history by going from Worst to First!

The launch was a conference call attended by everyone from Supply Chain and Process Management across all our facilities worldwide. The list of stakeholders we would need to connect with was long, but we knew that our Supply Chain team—the ones responsible for all supply/demand planning, parameter management, and purchase order placement/alteration—needed our immediate attention.

We embarked on a Holistic Approach, tackling every aspect front and center. The project was too big and the time too short for selective strategies to win the day. Moreover, we identified the key levers that controlled the flow of inventory into, through, and out of our company (see our blog Inventory Turnover Breakthrough (Part 2)). This helped us determine which processes required immediate improvement across the globe.

Topnotch leaders were put in charge of our regional Process teams. These dynamic individuals were excellent motivators and innovators who could work seamlessly across borders and push what was thought to be possible.

When the launch conference call wrapped up, we hopped on planes, traveling to every corner of the world to meet the teams from all our facilities face-to-face. Clear, urgent communication was crucial to impart the magnitude of our collective challenge, address any resistance head-on, instill the right culture, and rally everyone around our objectives.

Bravo for the Attack on all Fronts strategy (see our blog Hedge Your Bets For Success). Every Facility, Customer team, and Global Process team needed to comprehend the task, back us up, and meet our individual targets. It was a "all hands on deck" situation, and the only way we had a fighting chance was if everyone, and I mean everyone, played their part.

Weekly governance meetings were held with each Facility, Process team leader, and Customer team leader to ensure we had timely updates on progress, could swiftly address roadblocks and issues, and could steer behaviors towards transformational change. Time had never been on our side, and we couldn't wait for results only once a month and react.

This relentless focus and on-the-ground leadership enabled us to create the cultural change that was at the core of our endeavor (see our blog Inventory Turnover Breakthrough (Part 4)). The poor state of affairs was the consequence of years of ingrained behaviors, beliefs, processes, and practices, and we had to completely overhaul the way people worked every day, worldwide, and in record time.

The frequent reviews and governance allowed us to shape the behaviors necessary to drive revolutionary change. We needed results-oriented individuals who could make commitments and be held accountable for them. We needed risk-takers who believed in themselves and embraced endless possibilities. And we needed people who worked like a well-oiled machine, one team with one goal.

Over the ensuing weeks and months, it became clear that certain components of the project were progressing at different speeds. Certain Process teams and Facilities made a lightning-fast start, while others faced initial inertia. This information helped us pinpoint where we needed to concentrate our efforts to make sure every team was in a position to meet their targets.

By the end of the first quarter, we had improved our Inventory turns by 1.1, a level of achievement that hadn't been witnessed in a long while. It also lifted us from the bottom of the pile relative to our competitors.

The successes were shared across the entire organization, from the CEO to entry-level employees. We highlighted the achievements, communicated the upcoming steps that needed to be taken, and adjusted our targets upward. And we went back on the road to meet everyone around the world face-to-face, reinforcing our messages continually. Momentum was growing!

As the months progressed, we continued our on-the-ground behavior-focused approach, eliminating obstructacles and roadblocks, whether process-based or cultural, along the way. Healthy competition started to emerge between the Process teams and Facilities, each striving to be the leader in improvement. Everyone was, more than ever, aware of the importance of this project for the company's success, and our gaze was set on overtaking the competition.

After the second quarter, we managed to improve our inventory turns by another 1.1 turns—an unprecedented feat in our company's history and a victory that was rarely achieved by our competitors. We ascended to the third spot compared to our competition, and we had already almost achieved our end-of-year goal three months ahead of schedule. The once seemingly impossible goal was within our reach.

Heading into the final quarter of the year, we set our sights even higher. We went back on the road to keep the momentum going and to recognize the fantastic achievements so far. Just a few months prior, there were concerns and doubt about whether the goal could be achieved. Now the consensus was that we were going to surpass our objective.

From Worst to First!

We finished the year with a quarterly turnover improvement of 1.3 turns. We now had three consecutive quarters of improving turns by at least one full turn, something that had never been achieved in the annals of our industry. And when the dust settled and our competitors' results were revealed, the verdict was in: we had gone from the lowest in Inventory turnover to pole position!

The sense of pride in that accomplishment from everyone in our company was astonishing. Securing the title of industry leader was exceptional. We rose from the depths to the pinnacle. We had reduced inventory by hundreds of millions of dollars, slashed carrying charges, and improved profitability by tens of millions of dollars. We had elevated our Return on Invested Capital to lead the industry. And most importantly, we not only kept our promises to customers by not missing a single delivery, but we actually increased Customer satisfaction thanks to the vast improvements in the quality of our inventory.

We returned once more to the world's stages, meeting with all the teams who played a pivotal role in this remarkable achievement, celebrating with them. Rarely had our organization had the opportunity to partake in such a significant celebration. The widespread joy and pride were worth every minute of hard work.

Thanks to our relentless focus on process-based improvements and cultural change, we had developed sustainable results that endured for several years thereafter.

Our journey from Worst to First was nothing less than an unforgettable roller-coaster ride, and we had truly Changed the Game!

A Quick Shout Out to Our Technological Heroes:

WinForms ActiveReports: Customization like never before
Supplier A: For ensuring timely deliveries and negotiating favorable terms
Innovative Solutions LLC: Trusted technology partner for enhancing inventory management

Every little bit counts. Use our Inventory Turnover Breakthrough Toolbox to guide you as you embark on your own inventory transformation journey and reach for greatness!

Say Hello to the Future:

Join our LinkedIn Group, Inventory Management Insights, to connect with influential industry leaders and share ideas on how to disrupt the world of inventory management together!

[1] Inventory Management Techniques for Small Businesses. (n.d.). Retrieved from https://www.smallbusiness.chron.com/inventory-management-techniques-small-businesses-1560.html

[2] How to Calculate Inventory Turnover. (n.d.). Retrieved from https://www.investopedia.com/terms/i/inventory_turnover.asp

[3] Inventory Management Best Practices. (n.d.). Retrieved from https://www.inventorymanagementsoftware.com/inventory-management-best-practices

[4] Inventory Turnover: How to Calculate & What it Means. (n.d.). Retrieved from https://smallbiztrends.com/2011/08/what-is-the-inventory-turnover-ratio.html

[5] Inventory Management Trends for the Next Decade. (n.d.). Retrieved from https://supplychaindigital.com/article/inventory-management-trends-next-decade

Originally published February 23, 2017.

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To skyrocket our inventory turnover from 6.3 to 8.6+ turns within the year, we embarked on a comprehensive approach called the Global Inventory Turnover Breakthrough, targeting every aspect of inventory management, including supply chain management, demand planning, and inventory management.
Our flip from dismal inventory turnover to industry-leading performance was achieved through cultural change and relentless focus, influenced significantly by our supply chain team, who are responsible for supply/demand planning, parameter management, and purchase order placement/alteration.
For our business's financial health, it is crucial to work closely with the finance and industry sectors to ensure sound strategies for cash flow, return on invested capital, and managing expenses like handling charges, which were excessive due to our poor inventory turnover.
Looking ahead to maintain our competitive edge in the manufacturing industry, we will need to stay agile in our demand planning and inventory management practices, keeping pace with ongoing trends in technology like WinForms ActiveReports and innovative solutions from trusted partners like Innovative Solutions LLC.

Unleash Exceptional Success! Transform from Bottom to Top!