You know what usually happens when stock starts to back up when orders drop off.

Product starts dropping into black holes. Damage mysteriously occurs. Inventory comes and goes without proper paperwork hitting the books. It gets tougher to count units accurately.

Bottom line: The tighter your inventory space gets, the more inefficient your productivity will be. One chilling stat: If your already full inventory is increased by 7%, you can expect to see productivity dive by up to 27%.

Ouch!

Once stuff starts piling up in the aisles (often the first spot for homeless inventory), your workload can easily triple.

Instead of picking up one pallet or unit, workers must pick up one, move it, pick up the one they’re looking for, then put back the pallet or unit they moved in the first place.

That’s a mouthful and a headache.

There’s no easy solution.

You can:

• try to reconfigure your existing floor plan to accommodate overstock
• talk to sales or production about ways to expedite sale or use of more stock
• see if vendors are interested in buying it back, and
• try to document the costs and the outweigh the expense, consider making an argument for acquiring outside storage.

A recent survey of more than 300 supply chain execs revealed some interesting observations:

• Only one in 10 (11%) responded that supply chain planning and execution were handled as a single, joined process.
• More than half (57%) said there was some integration of supply chain planning and supply chain execution, and
• Nearly one in three supply chain managers said there was little if any link between supply chain planning and execution.

You might think that these stats reflect a lack of interest among supply chain managers in integrating planning and execution. Nothing could be further from the truth:

92% of the pros responding to the survey said it was critical to achieve better integration in the next 2 to 3 years.

As today’s business increasingly turns to running lean and just-in-time inventory processes, more companies will be expected to plan well enough to react and then handle even more demanding requests.

The biggest barrier, as is in so many cases, is communication.

That’s where the survey from CSCO (Chief Supply Chain Officer) Insights offers a four-step progression toward achieving optimum communication across departments of any given company.

• Baseline: Poor planning between sales and ops; disconnect between supply chain planning and execution
• Phase I, the Basics: Improved feedback between planning and execution; consolidated view of customer/internal demand; closer link between ops and sales
• Phase II, Real-Time Supply Chain: Real-time visibility; networks designed to react immediately, metrics for making/supporting decisions
• Phase III, Sense & Respond Networks: Multi-level visibility; new organization methods for supply chain planning; looking ahead to new supply chain technologies

It was that false sense of security that allowed a bookkeeper and financial officer to loot her employer for $9.9 million — that she used to buy 400 pairs of shoes that she stored in an enormous closet equipped with its own 32-inch plasma TV and a crystal chandelier.

Ouch!

Over a period of six years, she embezzled from her employer, a California cabinetmaker. Each week, she’d ring up $25,000 in credit card purchases (you’d have to work pretty hard to maintain that pace, wouldn’t you?).

The following Monday, she paid off the balance with company funds.

Some of the booty:

• 400 pairs of shoes, at least $240,000
• designer clothing, $300,000
• 160 purses at $2,000 each.

The company didn’t notice anything awry until a customer informed them that the customer’s check had been used to make a payment on the wayward employee’s account.

No auditor was ever hired to check the books, since this employee held such a position of trust.

In the meantime, her employer was forced to lay off employees and restructure operations due to money problems.

She was fired and turned over her assets. The company recouped about $2 million from selling her home, cars and other property.

It looks like she could end up getting a new room soon — one that’s significantly smaller than her shoe closet and with bars on the windows.

A survey of more than 400 supply chain execs by IBM — resulting in a report called “The Smarter Supply Chain of the Future” — ranked topics in this order. Respondents were asked if the topic impacted them to a significant or very significant extent.

• supply chain visibility — 70%
• risk management — 60%
• cost containment — 55%
• increasing customer demands — 55%, and
• globalization — 45%

Execs who were surveyed also remarked that all five topics are critical areas in successful supply chain management.

The IBM study also offered a few specifics.

On the subject of supply chain visibility, the biggest problem is the lack of information sharing and collaborative decision-making. This is not the fault of technology; it’s the way many companies are organized.

Risk management: Supply chains have been stung with more regularity in recent years, from defective products to bankrupt business customers and vendors, natural disaster, and a host of other causes that can take a toll on your efficiency. To get a step ahead of this, it’s become more critical to build risk management into your basic daily functions.

Cost containment: It used to be that supply chains could take a “tortoise” approach in continually improving costs and cost control. But today’s fast-moving economy demands a “hare-like” strategy, reacting daily to whatever cost issues might arise.

Customer demands: Most companies do a great job now of collaborating with your suppliers. It’s time to take that a step further, the experts recommend, and build the same type of relationship with your customers — deploying joint forecasting, for example.

Globalization: It’s not the cure-all and end-all some said it would be. In fact, one-third of the execs responding to the IBM survey said supply costs have actually increased due to global sourcing.  The main issues are product quality and lead times.

That’s the principle behind invoice factoring for small businesses, a trend that’s on the upswing.

Small business is the heart and soul of our economy. More than 99% of U.S. employers — 25.8 million — are small businesses.

With today’s economy, payments are running later than ever. This can greatly harm a company’s ability to take on new customers, and even to secure the most competitive rates from its own suppliers. It also makes it more difficult for these businesses to pay their suppliers on time.

Accounts receivable factoring attempts to build a bridge over this gap for small business financing. The factoring firm provides what is essentially a short-term loan.

When the company’s billing period ends, it re-pays the factor.

There are three steps most accounts receivable will do before initiating a business relationship with a new customer:

• Accept only one invoice for the first transaction, while the factor does due diligence
• Check the credit of the debtor listed on the invoice, and
• Confirm that the sale actually occurred.

That’s the situation that unfolded one day earlier this month at a Florida McDonald’s.

A customer came in and placed an order for chicken nuggets and paid for them.The restaurant told her her they were out of the nuggets.

The customer took it poorly: She called 911 and complained. The dispatcher listened and told her she was sending someone.

She called again. The dispatcher told her an officer had been alerted and was en route.

But when the police arrived, it wasn’t to help the complaining customer. They cited her for misuse of 911.

A statement for McDonald’s said the customer should’ve received a refund to begin with, and they’d sent her a certificate good for a free meal.

That’s because companies need to take a big picture approach to procurement, focusing on more than just price. What’s more important, experts say, is the lowest cost to the organization.

For example, what’s the use of buying the cheapest widget if it has a higher breakage/fault rate than widgets available from other suppliers?

By the time you factor in how much the breakdowns cost you in production, in paperwork, in deductions — it might be worth paying a little more and get a higher-quality product in return.

Your internal costs could outweigh any advantage you think you’re seeing from making procurement decisions based solely on price.

For many supply chain managers, this can be an uphill battle.

First, there’s the pressure to go with the lowest unit price.

Then, there’s the effort and difficulty involved in demonstrating that the lowest unit price is actually increasing operational costs.

It can take a while to document the additional costs, while the purchase price of the “cheap” unit remains front and center.

Finally, there’s the expectations many companies put on procurement/purchasing people to manage costs, right down to the unit level. This means you’ll need time and evidence to make your case for spending a little more.

Remind other managers that this is a time when many organizations are cutting corners, in addition to trimming prices. Some of these companies are cutting so many corners they’re not likely to be around for much longer — which will leave you in a lurch.

Then, you might want to mention the recent (and costly) peanut product recalls, and the resulting bad publicity. Those companies thought they could buy at the best price … and you see what happened.

We’ll share results in coming weeks.

Link to the survey.

Who can blame them?

So, what are the Top 10 words or phrases employees don’t want to hear right now? The following list is a pretty good start.

1. “Can I see you in the conference room?” Just as bad: “Can we talk?” and “Gotta minute?” In all cases, initiating contact with a tap on the shoulder makes things even worse.

2. “Isn’t your performance review coming up soon?” Particularly if it isn’t due for another two months.

3. “We don’t look at this as a problem – but as an opportunity.” Generally delivered with an insincere Pollyannaish lilt.

4. “I’ve always thought of us as family around here, but … ” Given the choice of laying off you or his mother, guess which he will choose?

5. You’re a great contributor, but … ” A compliment followed by a “but” is never a good thing.

6. “Maintaining the status quo is no longer an option.” Generally, the next sentence contains really bad news for someone.

7. “We’re going to refocus and concentrate on our core business.” That generally means refocusing on the business the company was in before it hired you.

8. “We’re not planning to have layoffs, but there will be some restructuring.” Hmmmmm.

9. “Due to the ongoing turmoil in the capital markets …” Any sentence that has “turmoil” and “capital” in it can’t be good.

10. “They’ve asked everyone to come to the Employee Appreciation Room for a 4 p.m. meeting.”

ProcurementAlert thanks www.buzzwhack.com (De-mystifying buzzwords).

Fortunately, there’s an answer: Experts have laid out a three-step plan that can help keep you on target and out of the cross-hairs.

1. Stand behind the boss — without kicking him or her in the butt. You never, never want to criticize your boss to a co-worker. You have no control what’ll happen to that information after it leaves your lips. Once it gets back to the boss, it’s likely you’ll find yourself being pushed off the fast-track and into the junkyard. If you must criticize, frame it around yourself. “I’ll be in a much better position to nail this project and help our company if I had …”
2. Rise above the crowd — without trampling your co-workers. Develop your personal talents and look for opportunities to show your creativity. Sharpen your language skills, so your written communications make a positive impact (and don’t embarrass you). Demonstrate to your boss that you’re comfortable thinking “out of the box.”
3. Offer solutions — instead of simply pointing out problems. If you’re bringing a problem to the boss, have at least one solution prepared and tucked in your pocket. No boss likes having a whiner who only complains without offering hope.  This also demonstrates that you’re a solution-oriented employee, which can lead to a bigger payoff down the road.