When planning on startup logistics, more focus is placed on access to capital—managing the related stress, premises acquisition, access to markets and operations. For startups, this is a daunting task as the learning curve is quite steep. Remember our recent post on learning curves—its costly to obtain experience on the rugged terrain of entrepreneurship.
So you get to wear many hats—CEO, Accountant, Marketing Manager, Operations Director, PA, Auditor, Cleaner and more.
How do you balance these roles which will be exerting different forces requiring your attention sometimes simultaneously? This often results in you being overwhelmed!
One of the most complex area that is often ignored and yet bring so much stress when things go south is inventory control. Quite often relegated to the bottom of the pile and yet the opposite should be true—many have closed their operations due to inventory control oversight.
Ideally the role should have a full time employee involved in procurement, monitoring movements, issuing out stock and then reporting. However in practice this is often a peripheral function but only taken seriously when the horses have bolted!
The more the products you deal with, the more the risks,
The wider the geographical area you have to deal with, the more the risks,
If the owner is often absent from the battlefront, the more the risks,
The more the personnel that deal with stock, the more the risks,
If the person involved in sales is also responsible for inventory, the more the risks,
If there is no system for record keeping, the more the risks,
Let’s take for example a new farmer involved in maize farming. The components of inventory likely to be the following;
- Seeds
- Fertilizers
- Herbicides/Pesticides
- Farming implements or tools
- Maize output
Unless one has experience then they are likely to have a rude awakening when they encounter losses from the above components.
Transporting inputs to the farm is stressful, so is the preparation of the fields and planting crops. Then the monitoring of the crops, applying fertilizers and herbicides till maturity. Add stress related to droughts and by the time the crop is ripe for harvesting, the farmer will be totally exhausted.
Now where will the farmer get time to be recording inventory, counting it, checking expiry dates etc? Truth is there is hardly time as one would have spent all the energy on the key activity—getting the crop ripe and ready for the market.
Recommendation
- Your business plan should factor in inventory control systems and should also cover audits,
- Budget for a secure place, have someone responsible for inventory control,
- Create systems for recording your stock movements, also regularly audit the system,
- Funds permitting, engage experts for inventory systems set ups and audits,
- Inventory reports should be part and parcel of your financial reports and should be reviewed,
There is of course more you can do to strengthen your systems. In reality inventory control is one of the toughest tasks for entrepreneurs as the results of losses are often not immediate but come at the end of a long period. A break in of the store house is likely to be concealed and perhaps come to light at the end of the farming season.
How do you deal with staff turnover and inventory? What if an employee just disappears with stock? How do you deal with staff selling own products in your shop?
This is complex science although at face value it looks like a peripheral role. And remember too that some of your employees could be fighting with you with an ulterior motive to sell some of the inventory. This is why its critically important for the owner to be 100% present especially during the first days when internal controls and systems are weak.
To business plan developers, on the risk management schedule–do not forget inventory control risks
