WINTER 2017

24 THE DISTRIBUTOR’S

24 THE DISTRIBUTOR’S LINK Robert Footlik Robert B. Footlik is a licensed professional engineer. A graduate of Illinois Institute of Technology, he has worked extensively in the fields of material handling, plant layout, packaging and management systems. The firm of Footlik and Associates serves as staff warehousing and materials consultants to six trade associations. Footlik writes for 12 trade and professional journals. Footlik and Associates is located at 2521 Gross Point Road, Evanston, Illinois 60601; phone 847-328-5644. RE-EXAMINING ‘D ITEMS’ Why would a “warehouse guy” ever want to justify products that don’t sell? The dead stuff takes up valuable real estate, forces everyone to walk further to get to live materials and ties up capital that could be better spent on higher demand merchandise. The answer is romance. Not in the sense of recent Supreme Court rulings, but rather the heart and soul of the business. There have been Fastener Distributors who tried to sell only the prime, most popular items. Their success has been chronicled in bankruptcy court proceedings. When it comes to Distribution in the real world, there is a huge difference between theory and what actually works. The “Name of the Game” is customer satisfaction, not just profits and losses. Given this reality, slow moving merchandise, usually termed “D items,” is a permanent fixture of the logistics landscape and therefore should be addressed not ignored. Painful as it may seem slow moving products are one of the reasons why customers turn to you initially and keep coming back. Often, these oddball and difficult to obtain items are your best salesmen and provide the best rationale for customer loyalty. While the academics tell us to “throw the junk out,” the realists and “old timers” continue to hold onto these materials saying: “You can’t sell off an empty cart.” The most profitable course of action lies somewhere between these two extremes but is often overlooked. Where Did All This Dead Stuff Come From? Any analysis of dead items must start with an CONTRIBUTOR ARTICLE examination of what the parts are and where they came from. The origins will frequently dictate the destination. For example, a special part that was an “A item” can become dead overnight when a key customer makes an engineering change. This obsolescence can reverse just as fast if the part is reinstated, or if it becomes a component of a repair assembly. Under these circumstances today’s junk can be magically transformed into tomorrow’s gold. This is particularly true if the cost of reproducing the part is high due to special materials or tooling. There is no way of knowing this without taking the obvious step of asking the customer about their intent and there is no reason to ask if you don’t even know that something has changed. Tracking usage and correlating this with specific customers can identify the problem, quantify future needs and develop an appropriate plan of action. After all if it’s never coming back, why carry it? But in the meantime should you play the odds or might the customer pay a carrying cost for consigned stock? Contrast this with an item that has become obsolete due to changes in codes or common usage. Under this scenario getting the materials out of the stock is the only guarantee that they will never generate a liability claim. Removing the Stock keeping Unit (SKU) from inventory and never buying it again will generate more space in the warehouse, raise efficiency and save time taking inventory. Unfortunately without specific and rigorous rules when the inventory goes to zero an order might be generated. This is one way to make a bad situation far worse. CONTINUED ON PAGE 102