In today's episode, host Charlie Malouf is joined by return guests Tim Clouse, VP of Operations, and James Ouellette, Associate Director of Operational Excellence, to discuss strides in inventory integrity and accuracy within their distribution centers. The episode delves into the company's transformation of its inventory tracking system, which was refined and tested rigorously, culminating in improved efficiencies and a rebrand from "inventory integrity" to "inventory profitability." The comprehensive system now utilizes collaboratively designed in-house tools like a master cycle counting scorecard that provides full transparency, quality, and tracking which elevates the integrity of the cycle counting program and an automated disposition algorithm that incorporates years of experience and thousands of data points and removes the emotional bias from decision-making in determining whether inventory should go to the shop or back into inventory.
Along with Cost Avoidance and Process Compliance, Inventory Integrity is one of the main pillars in Operations. In fact, Inventory Integrity is the #1 pillar, and as Tim describes, they want to take ownership of every piece that comes in to a distribution center with the expectation that it will be sold (delivered) at full retail value. As Tim explains, if a piece is not sold at retail value, then we have realized losses along with erosion of customer experience, broken promises, and increased costs. They discuss the mindset of thinking of inventory like cash and protecting it like a bank by keeping it safe and in mint condition with Fort Knox security.
The phrase "inventory profitability" was a rebrand of "inventory integrity" that was born from the ideation of the Operations Think Tank, the Epic Team, which is a cadre of high-level Operations Memory Makers who take time to think about what's next. The phrase Inventory Profitability originated around November 2022 and combined with some real world scenarios to help the messaging stick, this new paradigm allowed the leadership and management in Operations to help their Memory Makers understand inventory integrity at a different, elevated level.
Because of this new paradigm in Operations, two out of three main distributions centers were each able to avoid a year-end, full physical inventory by maintaining a remarkable 99.90% accuracy. Tim describes how these results were fostered with the use of daily, weekly, and monthly toll gates that provided necessary checkpoints along the way. Tim also extols the virtues of complete transparency as well as the collaboration and partnership with Therese LaValley and Bill Woodman from the Finance department, and how they bring a different perspective, audit our processes, and help make the program premier.
James and Tim offer advice on the benefits of repetition as well as daily discipline of doing sample counts or cycle counts that distill the work into small, manageable bites each day. They share that inventory integrity will reduce costs and improve margins, which are critical levers to the profitability of a home furnishings retailer.
In this episode, the three underscore the importance of a dedicated team, the role of discipline, and the benefits of collaboration in fostering inventory accuracy, all of which have substantial impacts on the company's financial health and customer satisfaction.
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