The Art of Inventory
2. Establish key performance indicators and set improvement objectives.
There's an old adage that says, "You can't manage what you don't measure," and that concept certainly applies to inventory of all kinds, including both finished goods and raw materials. Decide on four to six key performance indicators (KPIs) that you will use to measure your organization's progress in reducing inventory investment. To be clear, these metrics should be compiled for each major product line in your publishing portfolio. Some of the metrics you might consider include:
• Inventory turn
• Inventory/net sales ratio
• Obsolescence reserves
• Obsolescence ratio
• Months coverage
• Direct and implicit carrying cost
• Back orders
• Inventory value by year of publication
Remember that seasonal variations in inventory metrics are to be expected—like the cycles of the moon, you can count on inventory positions going up post-Christmas as the book-sellers clear the shelves of holiday inventory, or college book-sellers return unsold textbooks after the semester rush—so don't get too worked up if you see occasional deterioration in the metrics. However, if the numbers continue to worsen, it's time to start looking for answers.
3. Develop environmental awareness.
At first blush, one might think that environmental awareness refers to ensuring that your company has a sound ecological policy and, to be sure, that is important. But my definition of "environmental awareness" refers to developing an understanding of the market forces that are shaping book-buying behaviors. The sales patterns that shaped your traditional inventory strategies may be undergoing dramatic changes that justify a change in your buying behavior; patron-driven access, textbook rental, open-access texts for higher education, course packs, custom publishing and, of course, e-books are having dramatic effects on the marketplace, and it is no longer business as usual. Your inventory strategy should be adjusted accordingly.