Blue Elevator Blog

Taking inventory

The phrase “taking inventory” conjures up different ideas for different people.

At face value, “taking inventory” has an accounting flavor to it.  In fact, the first time I heard the phrase was in an accounting class at Cal State University Fullerton.  The professor shared with the class these comments.  “You guys will be doing accounting work.  However, this work should not be done in a vacuum.  You have to get out of your seats every once in a while.  You have to go down to the shop floor and see what’s going on.  You have be about taking inventory.”

Why should a business owner engage in taking inventory?

What did the professor mean by taking inventory?  He was not actually referring to the actual process of taking inventory (e.g counting widgets).  His comments were intended to encourage us to physically observe what is taking place in and around the businesses for which we would be doing accounting.

Taking inventory, Mark Twain style

When I think of Huckleberry Finn I am reminded of paddle wheel steam ships.  The paddle wheel steamship was built to carry a lot of people.  They were also built for navigating shallow rivers.  Because the river was shallow, extra care was needed in navigation.  Part of navigating these shallow rivers (e.g. The Mississippi River) involved the need to constantly check the river depth.  It was the Leadsman’s job to take these measurements.  He would drop a weight tied to a length of line and measure the depth of the river.  A shallow reading would require the captain to alter course to avoid running aground.  The term “Mark Twain” meant that the river depth was 2 fathoms (12 feet deep) and safe for navigation.

How does a business owner go about taking inventory?

Similarly, today’s business owner must take periodic “readings” to make sure their ship isn’t at risk of running aground.

This past year, I had occasion to share a cup of coffee with my friend, Sam Popovich.  During our conversation, Sam would share with me some valuable insight.  Some years ago, Sam worked in the car leasing business.  He worked for United Auto Group – a business owned by Roger Penske.  In case it isn’t obvious, the CEO of that company was/is none other than famed race car driver, Roger Penske.

Sam would share with me that the CEO, Roger Penske, made it a practice to visit each of his auto dealerships.  Now, based upon his status, he could have employed or paid someone to do this for him; however, he thought otherwise.  Using our paddle wheel story, Penske could have hired a leadsman to do this, but he thought to do this himself.

You see, only the owner of the company could evaluate whether the business is operating as designed.  And so, the same would apply to all of us.  We must be about taking inventory in our own business.

The benefits of taking inventory

Here are some valuable insights to be gained.  In taking inventory in your business, you are able to …

1. Identify where you are in your strategic plan
2. Identify whether your business processes are creating the desired product/service customer experience
3. Make the necessary adjustments in navigating your business

Some businesses employ people who are about taking inventory for them.  This comes in the form of secret shoppers, ambassadors, internal auditors, etc.  I am not suggesting that these functions be eliminated.  I am suggesting that they are not enough.

In taking inventory, only you (the business owner) can determine whether your business is properly reflecting the image, quality, service, and experience that you want it to reflect.

Part of starting and growing a successful business involves establishing procedures.  These various procedures are designed to positively carry out the mission of your business.  Here’s a quote from an article titled Getting Started:

“This (running a business) requires constant adjustments along the way.  Failure to respond to changes in the economy and underlying market conditions can run you ‘aground’ or push you way off course.”

Conclusion

Taking inventory is a very important principle every business owner should employ.  But that’s just it – don’t employ someone to do it.  Consider this proverb:

Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations. Prov. 27:23, 24

Here’s to smooth sailing.  We love hearing from people, so we invite you to contact us.  Mark Twain!