In light of Scott Malone's report earlier today that manufacturing profits continue to plunge, businesses must be aware that they are more connected than ever and the health of one business can have a ripple effect on the others. We have seen this in the auto industry but how about your business, are you vaccinated from potential deadly viruses from your customers and suppliers? Every business is interconnected in a complex web through their supply chains on a global basis, making inventory management an important finger on the pulse of the health of a business. When one business sneezes on another, it spreads the virus on everyone in their network, who then sneeze on their network and so on.
Like most pandemics, those that are at most risk are the small and the old and the unhealthy. According to SCORE, nearly two thirds of small businesses fail within their first seven years. In his book Small Business Management, Michael Ames highlights that inexperience and poor inventory management are among the top causes of failure of small business.
What is striking is that the symptoms can be misleading or asymptomatic, they may seem like just an ordinary seasonal flu or downturn but it can turn deadly. These novel influenzas change and evolve over time just like seasonal flu. Having too little or too much inventory is the same way as the impact on the financial health of the business can be hidden in the income statement and balance sheet details. For example, are you losing growth opportunities due to poor product availability, are you paying too much to rush a delivery because of poor customer service performance, do you have excess inventory that is slow to move or crowding your warehouse etc….
Why are small businesses so at risk? Margins and access to cash is so tight that they often forego investing in preventive medicine – technological vaccinations. So many small business owners I talk to have such tight margins, often times 3% or less, so there is no room to invest or take a risk. In his article for ITWorld on Technology Planning for Small Business Growth, James Gaskin notes that small companies can’t screw up because they are at a delicate stage of growth and that screwing up means more about paying too much for technology than it does about picking the wrong technology.
James highlights that using Software As A Service (SaaS), cloud computing, Hosted Application Providers are great techniques to not only conserve cash flow but they permit you the flexibility to make inexpensive mistakes and adapt as the virus mutates. If you try a SaaS you pay a few dollars per month, if you do not like that service, you stop the expense and the cash stays in your pocket.
While Jame’s points are true normally, they are not in the midst of an economic pandemic where picking the wrong technology can delay correctly treating the problem. If you wait too long, no medicine in the world can save you. In the case of inventory management, ask the questions that count – does the technology just tell you symptoms or does it guide you to implement the treatment to maintain financial health? Furthermore, does it tell you who around you may be ill and may infect your business? Finally does it permit you the ability to track your health improvement for the better you manage your inventory, the better chances you have to grow?