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The Benefits of Smart Inventory Management

To many small-business owners, inventory is simply the stuff they keep on the shelves to generate sales. Despite the investment required to maintain appropriate levels of inventory, they put little effort into  monitoring it. But ignorance about inventory can be costly. Just ask Todd Heim, owner of Future Cure Inc., a company in North Olmsted, Ohio, that manufactures spray booths used for painting cars. The typical spray booth has more than 300 parts, so Heim has learned how to manage his inventory effectively. "Inventory control impacts cash flow directly. That's how important it is," says Heim. Mismanage inventory, and you risk having your checking account hit zero, he warns.



Here are 'ive suggestions to help entrepreneurs manage their inventory effectively:

Computerize your records. Some businesses still use a manual tracking system when they should be using an electronic system. The cost of automating has dropped dramatically in recent years as computer hardware and software prices have fallen. A good PC-based system containing all the hardware and software you'll need can be purchased for as little as $10,000. If you don't have that amount handy, banks and leasing companies do, and they offer a number of cost-effective financing options. Entrepreneurs who aren't proficient computer users can use training packages to get up to speed; such packages are available from most computer vendors.

Heim installed a state-of-the-art automated financial system two years ago. Included in the package was a detailed inventory-tracking component. Using it, he cut the company's level of inventory by 25 percent in just a few months. The new system produced other benefits: Parts are nearly always on hand when needed. The need for costly overnight shipping has dropped. The amount of unused or unneeded inventory has been reduced dramatically. And employees spend less time scrambling to find parts. "We no longer have the truck ready to leave in 20 minutes with someone frantically running around looking for a part for the booth," Heim says.

Track inventory turnover. A good automated system will help immensely in calculating inventory turnovers. Total inventory turnover is stated either in number of turnovers per year or number of days of inventory on hand. For instance, a turnover rate of 12 times per year can also be stated as 30 days of inventory on hand. You should track this number and compare it against industry averages, which can be obtained from trade groups. If, for instance, your inventory turns 12 times per year and the industry average is 15, your operations may need improvement. It's also important to track turnover for individual items. Jim Laws, owner of two Video Review stores in Greensboro, N.C., installed an automated system that computes inventory turnover for each video in stock.

"We compare turns from week to week, or even day to day," he says. "We will often cut loose excess copies if they aren't renting and sell them as previously viewed on a retail basis in the store." Heim's computer system also tracks the turns of each item in his inventory. "Before we put in our automated system, we would find some parts with a year's worth on hand, while some would be completely out when we needed them," he says. "It was very costly, but we can now manage individual items effectively."

Balance data and educated guesswork. Even for a business that tracks turnovers with an automated system, finding the balance between too much and too little inventory can be an inexact science. This is particularly true for retailers and wholesalers expected to provide their customers with "just-in-time" inventory levels — supplying the customers with their inventory needs no sooner or later than the goods are needed for manufacturing or distribution. Laws, who has been in the video business for 15 years, says this guessing game is one of the biggest challenges he faces. "We are trying to anticipate demand," he notes. "We are making decisions each week on each movie trying to guess its potential popularity. Then we have the added challenge of guessing how many copies our competitors will stock." To try to find the right balance, he relies on his tracking of past trends for similar movies, as well as input from a buying service. "If we spend too little, we won't have enough to meet demand, and our customers will go somewhere else," says Laws. "But if we spend too much, it costs us money. Finding the right balance is tough but essential in our business."



Create an ordering system. Many small-business owners make the mistake of letting just about anyone order inventory, but it's a specialized task that requires dedicated attention to detail. Laws says he orders all inventory himself to ensure uniformity. Heim delegates this responsibility to one person only. "If we had four or five people ordering inventory, it just wouldn't work," Heim explains. "Our inventory person knows the policies of the vendors, their personalities, lead times, and the costs. He also has built relationships with our vendors that enable him to ask for special favors when we get in a pinch." Besides the specialization involved, say experts in the field, an efficient ordering system typically involves certain practices, such as never overordering just to save a few dollars, using just-intime ordering whenever possible, shopping for suppliers periodically, and asking for discounts.

Hold employees accountable for inventory management. Accountability is critical in managing inventory. In a manufacturing business, this means tracking parts used in assembling products. In a wholesale or retail company, it means holding key employees accountable for inventory ordering levels, for shipping errors, and for any acceptance of defective items. Let your employees know that you regularly review inventory-control reports and that they will be held accountable. Says Heim: "Our computer gives us all the inventory information we need, but a business still needs a competent employee putting that information to use and being held accountable for doing it right."

If you think of your inventory as dollar bills on your shelves, you'll have a greater  appreciation for effective inventory management. Laws came to understand this concept well as his video business grew. "We started small," he says. "Now we order the same amount of inventory in one week as we had in our store's inventory when we first opened. Inventory management is one of the most critical aspects of my business."

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Ideas for Making the Most of Time on the Road

In a recent survey of extended-stay business travelers by Residence Inn by Marriott, a division of Marriott International, more than 70 percent of the 1,250 respondents said they felt "productive" or "refreshed" at the office after returning from a long business trip, and more than 53 percent said they felt "refreshed" at home, too. Almost all respondents said they enjoyed having a little time to themselves while traveling—but they felt guilty about it. They shouldn't feel that way, though, says Stephen R. Covey, author of The 7 Habits of Highly Effective People. An extended business trip is "a rare opportunity to regain perspective and be more effective," he says.



At Marriott's request, Covey came up with ways for business travelers to enjoy their personal time while on extended trips. Among his suggestions:

• Take a book you've wanted to read.
• Be a tourist: Take a carriage ride through an old downtown, sample local foods, buy a disposable camera and take photos, buy a souvenir for yourself.
• Start a personal journal.
• Sketch plans for forthcoming special occasions such as anniversaries, family reunions, and New Year's Eve.

"When you are away from the normal home and office world for more than just a few days," Covey advises, "make the most of your unplanned 'escape' time."

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Making the Most of Trade Shows

As you pass the booths at some trade shows, you're likely to get the impression that the people who talk the fastest or who give away the best free items get all the orders. There's no question that handing out lots of logo-embossed trinkets is a sure way to draw a crowd, but the $64,000 question—even for those whose products just naturally draw attention—is: "How do you turn that crowd into customers?" At Boston Warehouse Trading Corp.—a distributor of attention-getting housewares and gifts—25 years of experience has taught us that the trade shows that benefit us most are those that generate transactions beyond the handing out of free gifts.



At the same time, we've learned that just because a trade show doesn't generate immediate orders doesn't mean it won't help us. When the company was smaller, I agonized over trade shows that didn't result in instant sales increases. Today, with 70 employees and annual sales of $25 million, ou. most important show of the year isn't where we get the most orders on the spot but rather where we don't take orders but get to meet the decision makers of our largest customers.

For any company, a presence at trade shows can represent a major expense. Here are some ways to make the most of that money and win the trade-show game:

- Know why you're there Different
shows have different purposes. To be successful, you need to determine the show's main purpose for both your company and your potential customers. Is it geared mainly to selling and buying, for instance, or more toward networking with those in the industry? Understanding why you're at a show is vital to developing your expectations and assessing your success.

- Make them remember you Whether
you spend $2,000 or $500,000 on a booth, your display must be spectacular. You have just a few seconds to grab buyers' attention, so you have to create an ambience that helps show your products in their best light. Knowing what show attendees expect in a display—whether they value efficiency more than aesthetics, for instance—is key to designing and setting up your booth and establishing an identity for your company. Our booths have had continuity from year to year—which makes them easily identifiable—but buyers also expect them to reflect the trend-setting nature of our merchandise.

- Make it easy for buyers to buy
Put stickers on your merchandise that include prices and identify the items—distinguishing the 7-inch candle from the 9-inch, for instance. Make sure that staff members are knowledgeable about the details of the products and the expertise of other staffers. It's equally important to inform staff members in advance about what's expected of them in terms of individual performance and company goals—in short, what their roles will be in making the show a success.

-Take a cue from the past
Analyze data from previous shows. Develop a system for tracking every item sold to new and repeat customers. Identify results such as the total number of orders and the average order size. This information will help you to develop future displays based on buying preferences and create buyer-incentive programs aimed at increasing sales to each show's target audience.

-Give a catalog, get a business card, follow the lead
It's important to follow up on the sales leads generated at a show. Develop internal systems that allow you to track customer contacts and orders. If your sales force determines that nothing has become of a lead two to three months after a show, make sure the prospective buyer is contacted again. Doing everything else right at a show doesn't mean much if you let solid sales leads slip through the cracks after the gear has been packed up.

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Turn Anger Into an Asset

These practical hints can help you to redirect your feelings of hostility into less destructive channels

ANGER PUSHES its way into business as it does into all human activity. Much of the time it destroys good relations and efficiency but it can be turned into a constructive force. By being aware that anger is a part of his personality and by understanding some of the ways to deal with it, an executive can reduce the harmful effects which anger can have on himself and his co-workers. A manager first should consider how and why his own anger arises, and how it can show up in situations involving other people.

Fundamentally, anger is hate. "Hate I consider as an internal sin," says former Marine Corps Commandant Gen. David M. Shoup. "And hate is closely associated with fear. I think fear breeds defeatism and that is a disease we cannot afford in this country. . . ." The general is right in several respects. Hate is closely related to fear because impulses to aggression, or hate, are necessary for self-defense. But anger can be self-defeating.

Anger arises when a man feels he may be defeated, even if the feeling is so subtle that he is unaware of it. Every person has weak spots—situations which are more provoking for him than for others. And if you threaten a person he will automatically go on the defensive.



That is what Don G. Mitchell, chairman of General Time Corp., means when he comments, "How do you go about making things happen? Is it a case of applying more pressure? Is it a case of making the boys walk up and down the wall? Do you get yourself a sharper and longer needle? No, you don't do any of those things because all that's doing is pushing the door shut." Several guidelines can be helpful in managing anger.

• Find out what's making you mad and direct your energies toward getting it under control. For example, it's no! unusual for executives to be angry with a subordinate because of below-average performance. It is equally common to have differences with colleagues. Frequently, however, executives do not talk to the people with whom they are angry about their feelings of anger. They act as if the problem will go away if they do not discuss it. Sometimes it does. But more often it festers. The executive finds himself avoiding the other person, pretending joviality or quibbling over minor matters. He continues to be irritated. It is far better to get a problem out in the open where it can be discussed and resolved. That way anger can be used constructively.

Many people frequently find they can't discharg their anger at those who provoke it—or solve the problems which created their frustration in the first place. So they discharge their anger at helpless targets. Some men pick on their wives and children. People tend to look for scapegoats less powerful than they are, or who must take their hostility, or from whom they can easily escape. Store clerks, public officials, waiters, maids, subordinates, children are frequent victims.

An ordinarily gentle man may snarl at another driver because in a few minutes he will escape the other and never see him again. The same thing happens to some managers who act as though they will never run out of subordinates. The head of a large savings and loan office, now in his mid-fifties, has been highly successful and is widely known throughout the industry. He sees himself as a firm disciplinarian and taskmaster—the best kind of boss for developing others. His subordinates, however, regard him quite differently. They find him unjust and intemperate. They are aware that he needs to have a whipping boy; he is always highly critical of at least one of his subordinates and rides him so hard that the subordinate quits. A few weeks later the manager will transfer his highly critical attitude to another subordinate and the cycle resumes.

• Understand that sometimes when people become angry at you they are not necessarily angry with you. If you are in a position where it is easy for people to attack you, some will use you as a substitute for the real causes of their anger. These causes may be themselves, their husbands, wives, bosses or parents. If you are responsible for supervising people who are in such a vulnerable position, help them understand that one of their job hazards is the likelihood that customers or clients may at times become inappropriately angry at them.

This does not mean that you should disregard customer complaints about your own or your subordinates' work, but it does mean that you will have to take this point into consideration. Another side of this problem is how you—and your subordinates—react to criticism of your work. Everyone's performance is evaluated in some way. Even the most powerful executive is judged by his board, his stockholders, his creditors, governmental bodies or his customers.

Criticism of performance is not criticism of the person as a person. Although it is extremely difficult for people to keep these two ideas separate, unless they do they will have problems, for no human relationship is free of criticism. Criticism is a necessary precondition for growth, provided it is directed to the way a job is done and not to the person himself. When evaluating a subordinate, focus on job performance. If you are being evaluated try to help your superior concentrate on how you do your job. You might even ask what be thinks of various aspects of your work if he has difficulty recalling details.

Robert C. Wheeler, vice president of Corn Products Co., points out that one of the most effective ways of determining the potential of managers is to observe them, and that such observation is the responsibility of line management. "On the other hand," Mr. Wheeler adds, "the subordinate has a responsibility to communicate upward. He must keep his superior informed about what he is doing." The superior cannot observe all of the subordinate's performance.

• Keep cool. When someone becomes openly angry with you, that is his problem, not yours. There is much truth to the saying, sticks and stones may break my bones but names will never hurt me. Words will not hurt you. If you are wrong, a simple apology and whatever amends are necessary are enough. If the other person persists in criticizing you or in trying to make a fight of it, something is itching him. You do not have to respond to his itch.



If you understand such behavior to be his problem, you will be less likely to respond with anger to his anger and become a participant in an emotional battle. Don't lash back at him or bend over backward trying to appease him. Both reactions will merely aggravate the situation. Extended apology tells the other person you feel you were wrong. It also lets him know you fear his anger. Like lashing back, it tends to provoke more attack. Make clear that while you won't trade hostile remarks you will not permit yourself to be exploited.

Sometimes people systematically use anger as a device for cowing others, knowing that most people back off from angry scenes. Nothing reduces them to good manners as quickly as stating in a calm voice that you will not let yourself be attacked. When a man is victimized by others, it is often because he permits it or even unwittingly encourages it.

Sometimes subordinates or associates are testing to find out how far they can go and when someone else will take a firm position. Often they do this unconsciously. The late Irenee du Pont, one of three brothers who led E. I. du Pont de Nemours & Co. from a small explosives manufacturing concern to the position of the world's largest diversified firm, felt that sometimes a man has to swear at his colleagues to drive home a point. But this does not mean that anger should be used as a whip or club, for that will only produce fear, resentment and rebellion. Anger used this way should be used sparingly.

• Another way in which becoming angry can be a step toward solving a problem is to channel the anger into competition. A man whose competitor gets ahead of him wastes his time just getting mad about it. But if his anger becomes a stimulus to finding new competitive advantages for his firm—in the form of innovations in products or services—then he has turned it to constructive use.

Virgil B. Day, vice president for management development and employee relations services of General Electric Co., recalls this experience: "Four years ago the Japanese made their initial push with a shirtpocket transistor radio which spectacularly undersold domestic markets." Instead of responding with angry demands for high tariffs, GE was spurred to tackle the problem head on. It redesigned its products, obtained cost-cutting ideas at all levels and got union cooperation in adopting more efficient methods. "Where we once had doubts about our ability to keep on our 1959 labor force," says Mr. Day, "today we are employing one third more people in this operation."

• It's easy enough to know when you are clearly angry with someone. It is much harder to be aware of subtle hostility. Much of the time we overcontrol our angry feelings or turn them unwittingly on our selves. The man who is always clapping a lid on his anger, pretending he is not angry, is a good candidate for psychosomatic illnesses or worse. He is like an  automobile driver who is racing the motor with one foot and applying the brakes with the other. A man who constantly sits on his own emotions loses some of the spontaneity, sparkle and initiative he could have if he let himself he more free. Restraining or denying his emotions forces him to keep up his psychological guard continuously, an effort which requires much of his energy and literally wears out body organs, increasing the likelihood of hypertension, headaches, coronary disease, intestinal disorders and so on.

More than half the people who visit their family doctors seek help for illnesses which are psychological in origin. Fully 90 per cent of headaches, in the opinion of one neurologist, are psychologically caused. New York Telephone Co. physicians who studied 3,400 employees reported that 25 per cent of them accounted for more than half of all the disability, approximately two thirds of all days of disability and a similar proportion of the cost of sickness. The problems of these employees were primarily psychological and the doctors concluded, "Attention to an unsatisfactory life situation may be more important than any other aspect of treatment." Some forms of self-destruction, such as suicide and alcoholism, are evident to everyone. Most selfdestructive behavior is not recognized as such. It is often passed over as poor judgment or immaturity, as in this actual example:

An experienced, conscientious assistant to a corporate vice president does not seem to be able to accept a decision as final. He continues to talk about the issues. His persistence, which goes beyond good taste, annoys his colleagues and superiors. Occasionally, when he pursues the subject in the presence of others outside the firm, his talk can be very embarrassing. He does not mean it to be so, and he is not consciously trying to be difficult, but he continues this undesirable behavior even though it has been pointed out to him. The self-defeating aspects of his actions lie in the fact that he will not be given more responsibility. Some day someone is likely to become angry enough with him to fire him, despite his conscientiousness.

• When you are angry, your judgment is impaired and you are not likely to act constructively. The angry man is like the old fire horses which jumped into harness position the moment they heard the fire bell. A man cannot tell a false alarm from a real one until he has had a chance to take a good look at the situation—and some people, once aroused to defense, are never able to take a second look. They are too busy defending themselves by attacking. Sports, hobbies, home projects, travel, all serve a safety-valve function. Volunteer or service activities often enhance a man's self-esteem and provide gratifications that foster the constructive forces in his personality. The stronger these forces, the easier it is to deal with anger. Fast action advisable If anger threatens the stability and effectiveness of a corporate team, it is important to control it immediately. Otherwise it will mount in intensity until it becomes destructive.

Once control has been established, then you can do something about the anger. In such a situation avoid the tendency to concentrate on finding out who is to blame and to think the problem has been solved once the culprit has been found. It is too easy to find scapegoats. If there are problems which give rise to anger, it is far more constructive to have people talk the problems out, clarify them and suggest ways of working together more effectively.



Consider the common problem of cutting costs. Frequently a decision to intensify cost-cutting efforts results in pressure on first-line supervisors who in turn put pressure on the work group. Work groups often see dozens of ways in which money is wasted, ways which management cannot see because it is too far away. When the waste they see costs far more than they can save, the work group is likely to respond to cost-cutting pressure with a good deal of anger. If the work group becomes turbulent in its anger, management is prone to blame inadequate supervision.

And the supervisor is the closest managerial arget to the work group so the employees find it convenient to protest his methods. The upshot is often the discharge or transfer of the supervisor. The employees may be temporarily pacified by the sacrifice of the supervisor, but the anger will recur until the underlying problem is met and resolved. Anger is a strong and primitive feeling. It is the source of tremendous energy. That energy can be dissipated in various forms of explosion, which inevitably result in harm to a person, to a group of individuals or to a business. Or it can be harnessed and converted into problem-solving action. A fundamental task of every manager is to understand the origins, power and consequences of anger. Only then can he manage it sensibly.

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Here's Way to Rebuild Your City

Here's Way to Rebuild Your City


Businessmen and city officials work together to spark construction boom

DOWNTOWN ROCHESTER, N. Y., is enjoying a construction boom, with $33 million worth of new buildings recently completed, under construction or in the planning stage. This striking upsurge in building has taken place since the completion two years ago of Midtown Plaza, a $24 million downtown rebuilding project conceived and executed by local businessmen with the help of the city government. The significance of such locally built projects is emphasized by Republican Rep. Frank J. Horton of Rochester:



"This is the most effective urban renewal program because there were no federal funds involved. Private enterprise, in partnership with the local government, without the use of any federal funds, was able to complete an urban renewal project in the heart of the downtown area." His comments are particularly timely because of the growing doubts about how effectively the 15-yearold federal urban renewal program is accomplishing its purpose. These doubts—coupled with increasing instances where downtown areas are being rebuilt with private capital—are causing Congress and others to take a sharply critical look at the Urban Renewal Administration and its current request for $1.4 billion in new spending authority.

Midtown Plaza was conceived in 1956 by the owners of two competing department stores. At that time a federal urban renewal project on the edge of the downtown area—the Baden-Ormond Project—had been under preliminary planning by the city for four years. This project is still not entirely completed. Two years later another federal urban renewal project came under serious consideration by the Rochester city government. Known as the Genesee Crossroads Project, it would clear and redevelop a section of commercial property not far from Midtown Plaza. A federal planning grant was received in 1961, but acquisition of the property prior to clearing is not expected to start until late this year. Officials expect it will take three years more to clear the land and turn it over to a private developer. A motel chain which was interested in building there has given up and put its new unit on the other side of the downtown area.

More speed from private enterprise Though the three projects are not directly comparable because of the smaller size of Midtown Plaza, they give some indication of the greater speed with which private enterprise was able to act at a time when Rochester's central business district was deteriorating so rapidly that property values were seriously endangered. Commenting on the development of the Plaza and its surrounding area, Robert P. Aex, who was city manager of Rochester from 1953 to 1959, says:



"The power and speed of private enterprise have taken hold and there is no doubt but that new construction and modernization are as contagious as is deterioration. "Why are government projects so slow? It takes the bureaucratic wheels a long time to turn but, more important, the dollar incentive that exists in a free enterprise project is lacking. "There are incentives for speed in a private project that are just not there in a federally aided project. When I see private developers hurrying night and day because the cost of borrowed money continues to run, and when I see them with an investment in equipment, I know they have these and other incentives to get things done in a hurry."

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