A mid-sized furniture maker once told me a maddening story. Their warehouse had enough raw wood to build for six weeks. Yet twice a month, a truck would arrive to pick up a customer order, and a key component would be missing. The purchasing manager’s answer was always the same: “we have plenty on order.”
Plenty on order isn’t the same as plenty on the shelf. That phrase alone was costing them $18,000 per month in express shipping and partial deliveries. ERP Consulting started by asking one uncomfortable question: what do we actually sell, in what combination, and how fast do we truly use each material?
The mistake most inventory teams make
They treat every item the same. This company bought hinges in huge batches because a supplier gave a 5% discount. But hinges were cheap to store and slow to move. Meanwhile, they bought specialty leather in tiny lots because it was expensive, and ran out every other week when a rush order came in.
It was backwards. The expensive, hard-to-replace materials were the ones they should have stocked deepest, and the bulky cheap stuff should have been trimmed down.
- List your top 20 materials by how much they disrupt operations when missing, not by purchase cost—those are two different lists
- Set a minimum stock level for each critical material based on your supplier’s actual lead time, including weekends and holidays
- Run a simple count twice a week for the top ten problem items; a 20-minute task that catches 90% of stockout surprises
What the numbers showed after one month of tracking
They discovered that 70% of their stockouts came from just seven materials. And the supplier for those seven had a 12-day lead time, not the 5 days everyone assumed. See the gap? For seven critical items, they were reordering nearly a week too late, every single time.
Once they adjusted reorder points to match real lead times, stockouts dropped by half in the first month. They also freed up $28,000 in cash by cutting the unnecessary hinge inventory they’d been hoarding for that 5% discount.
Why the system matters more than the spreadsheet
A spreadsheet can record a reorder point. But it won’t tell you that a slow-moving item is tying up your cash, or that lead times just stretched because your supplier changed their production schedule. That’s where a proper system earns its keep.
Here’s the honest truth: inventory problems are almost never about lazy people. They’re about people making decisions with bad or outdated information. When I work on these engagements, ERP Consulting always starts with the trust issue—do your people actually believe the numbers on the screen? If not, fix the data first, then the rules. Set your reorder points from real lead times, not gut feel, and review them every quarter because suppliers change faster than you’d think.