M15BuildOperations· Module 4
Inventory Management
The shelves are full of the wrong stock while the right items run out.
- Fix
- Manage
- Operations
- Finance
- ~5 min · Calculation
The business problem
Inventory is cash in another form. Businesses buy on instinct or supplier pressure, keep slow items for years and run out of fast ones. Stock records don't match the shelves, so staff stop trusting the system and keep their own lists.
Why it matters
Better inventory control releases cash, reduces write-offs and improves availability for customers — often at the same time.
What you will learn
- Classify stock by value and movement (ABC/XYZ)
- Set reorder points and quantities for key items
- Identify slow-moving and obsolete stock
- Design stock counts that keep records accurate
Core questions
- Which 20% of items account for most of our sales and stock value?
- How many days of stock do we hold, by category?
- Which items haven't moved in 90 days?
- How accurate are our stock records?
Work through the module
CaseWhat is happening?
Auto spares retailer, 4 shops · Illustrative teaching case
An auto spares retailer frequently runs out of popular filters and brake pads while carrying years of stock for older models. Buyers order what suppliers promote. Classifying items by sales and value shows that a small number of lines drive most sales, while a large share of stock value sits in items that have not moved in a year.
Full teaching case: Revenue Without Cash · The Family Employee Problem
DecisionWhat does the leader need to decide?
Keep buying broadly to avoid missing sales, or manage stock by classification and release cash from slow lines?
FrameworkHow should they think about the problem?
ABC classification and reorder points
Rank items by annual value: A items (the top ~20% driving most value) get tight control and frequent review; C items get simple rules. Reorder point = average daily use × lead time + safety stock.
ToolWhat can they use?
Stock classification and reorder sheetCalculation
- Export 12 months of sales and current stock by item
- Rank items by value and mark A, B and C
- Calculate days of stock held for each A item
- Set reorder points for A items; list items with no movement in 90 days
ApplicationHow does it apply to their business?
Apply it to your own business:
- Classify your stock
- Calculate days of stock for your top 20 items
- Price the value of your slow and obsolete stock
ImplementationWhat changes?
What should change in the business:
- Apply reorder rules to A items
- Agree a plan to clear slow and obsolete stock
- Start cycle counts of A items weekly
ReviewDid it work?
How to tell whether the change worked:
- Have stock-outs on A items fallen?
- Has total stock value or days of stock fallen?
- Has count accuracy improved?
After this module you should be able to decide
Keep buying broadly to avoid missing sales, or manage stock by classification and release cash from slow lines?
And leave with: A stock classification with reorder rules for fast-moving items.
Sequence · Operations