I remember reading in the 90s that the businesses that deal with inventory will soon be out of business because of the cost of carrying inventory. The future was in being a service-oriented company. And if you’ve hired a plumber lately, you will see how true that forecast was.
The default cost of carrying inventory is 25% of the value of the inventory. This means that if you have $1 million of inventory, the annual cost of “carrying” that inventory is $250K. This amount includes the rent, the property taxes, the payroll and payroll burden, the utilities, and all the other cost ingredients that go into this cauldron of dollars.
In order to be successful in the inventory business, you have to beat that assumed 25% overhead burden. One way to win this war is to have the proper accounting software that will inform you of the correct amount of inventory to carry by SKU, by supplier, by transportation method, by warehouse, and by location. Your mission, if you decide to accept it, is to shave as many percentage points as possible off that 25% assumed amount.
With Plus & Minus Accounting Software, we only use tested math formulas that provide proven results. We use the math of Gordon Graham who literally wrote the book and formulas for proven inventory management. If it’s not in the book, it’s not in our software. Plus & Minus has the maximum info at the minimum cost or, to state it like economists would, the ultimate in efficiency.
