Devoted to Managers and those that seek to improve their management skills

Warren Buffett and Secrets of Management - 45

When talking about managing inventories, it's not just related to retail businesses, which is the first thought that comes to your mind when you hear the words. All businesses have inventory. It can be office supplies, technology, or whatever support systems or products that a business may use.

A key to managing inventory is of course aided a lot by software today, but many  companies still use the human touch as well.

When I was managing a large company that served school systems across the U.S., I would find some managers that simply ordered supplies without doing much checking, and others that did it almost perfectly as they used existing data and experience to order inventory just right.

As a result, some had to be trained in the importance of inventory managment. How managers handle inventory is another one of the traits that Warrent Buffett looks for when deciding whether he wants them for a partner. 

Another large company I ran for its owners was almost driven into the ground as the owners couldn't resist buying every new type of offering that marketers brought before them (they made those decisions). Their inventory management was horrible, and nothing I could do would cause them to listen, eventually they had to sell a tremendous business because they had no control of their inventory.

Why is this so important? It not only deals with managing inventories, but also the capital investment of the company. 

Another thing to keep in mind about managing inventories is that our people must be considered inventory from the financial investment way of looking at it. I've seen companies fail because they don't manage their employment or outside contractor inventory well at all. They spend far higher percentage of profits than they can, and so don't have a healthy company.

The key to success is to keep our inventories low. It never fails when a company has an abundance of inventory, that people will always overuse the products needed; specifically in service businesses. Low inventories ensure that workers will use products how they should be, and resist the tendency to use more than needed, which digs deep into the profitability of the company.

Other Buffett Resources:

Wisdom of Warren Buffett

Warren Buffett, investor

Warren Buffett: The trouble with being a legend

Warren Buffett: 'I told you so'

Company growth

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