Accounting Best Practices, Fifth Edition

16–43. Focus Inventory Reduction Efforts on High-Usage Items

When the directive is handed down to reduce the total company investment in inventory, the materials management staff tends to throw up its hands in dismay and tackle the directive for all the thousands of items in stock. The result is a pitiful effort on a per-unit basis, since the materials management staff can devote only a minor amount of time to this goal. Due to the broad scope of its efforts, the company’s inventory investment may not decline at all.

A solution is to focus their attention only on the reduction of high-usage items. There are several reasons for doing so. First, by definition, slow-moving items are not going anywhere soon, so the materials management staff would have to wait a long time before the natural ongoing usage of these items will bring about any sort of reduction. Conversely, the turnover speed of high-usage items will cause a rapid inventory reduction in short order. Second, high-usage items represent a small portion of the total items in stock, so the staff can focus on reducing the quantity of far fewer items, resulting in both more attention to fewer items and plenty of leftover time for the staff to complete other tasks.

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