Excess inventory: What is the real cost of not reviewing your inventory management processes?
That’s right I said the cost of NOT reviewing your inventory.
Usually when people (me included) raise the topic of the cost of inventory we talk about the financing and management costs of holding inventory.
However, with spare parts many people consider these costs to be either conceptual or ‘sunk’ (that is, a cost that cannot be recovered).
It is this view of spare parts inventory costs that prevents many companies from taking action to review their inventory and particularly review their spare parts inventory management processes. The attitude is: if it is hard to define or ‘sunk’, then why bother?
But there is another inventory cost that is often overlooked.
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Posted by: Phillip Slater