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Our newsletter contributor, IMS, explains the importance of balancing inventory management with cost efficiency:
While shopping recently, I noticed a woman with a shopping cart filled with soup cans—at least 30 of them. Curious, I asked what she planned to do with so much soup. She explained that it was on sale, so she was stocking up. It reminded me of cleaning out my grandmother’s house, where we had to throw away the large quantities of canned goods she had accumulated over the years when she thought she was saving money by buying in bulk. In the end, most of it went to waste.
At IMS, we often discuss the issue of excess material and how to balance cost efficiency with inventory management. When your design is stable, and you have predictable production schedules, managing extra material can make sense. However, for smaller, irregular builds, it’s often more practical to invest slightly more upfront in smaller quantities to avoid the costs and challenges of holding onto excess inventory.
My grandmother grew up during the Great Depression and World War II and thus found comfort in stocking up, as space was not a limitation for her. But in business, space, and budget constraints are real. Tying up cash in excess material may not always be the best decision, especially when components are easily accessible in smaller quantities, like half reels or strips. Although they may cost a bit more per unit, the savings in space, time, and management are often worth it.
Had my grandmother known those canned goods would eventually go unused, I believe she would have reconsidered her approach. In the same way, it's crucial for businesses to weigh the true cost of excess inventory against its potential benefits.
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