How Our Inventory ‘Just Do Its’ Amped Up Customer Satisfaction, Efficiencies

Contributed by James Gerhart, Director of Supply Chain, 9 months
No Small Goal
In early 2024, R.S. Hughes had high levels of inventory and record quarterly write-offs. Our Vice President of Operations at the time suggested I conduct a pilot program in the Pacific Northwest to address our inventory issues.
I have experience in inventory and global supply chain management and have managed hundreds of thousands of active parts. Understanding how better inventory management can help reduce costs, increase efficiencies and improve customer satisfaction is a critical part of my job.
We established a goal to reduce surplus inventory—the dollar value of product on hand for more than three months—by $1,000,000, or nearly 15 percent of total inventory, within three months.
We assembled an Inventory Management team with key stakeholders across the company to learn the current state of inventory and determine how we could decrease our surplus inventory level.
A Critical Piece of the Puzzle
As the pilot team began decreasing surplus inventory, teams needed to be educated on how inventory management would improve customer service, so, messaging was critical. Sometimes, people hear “inventory management” and think, “Uh oh, inventory is going down.” That can be beneficial for cash flow and the balance sheet but not always a great feeling for salespeople. Weekly cross-functional meetings helped eliminate those concerns by communicating customer and financial benefits.
Diving Into the Data
Together we found several factors contributing to inventory surplus and lower customer satisfaction, including inaccurate inventory system settings and expired material on shelves. We identified sourcing opportunities that would allow us to get products to our customers quicker, avoiding backorders.
Other issues we uncovered and needed to resolve included large supplier minimum order quantities purchased and received all at once rather than spreading receipts out over time, make-to-order or custom products purchased without customer orders or commitments to purchase, and customer blanket orders with no release dates or customer commitments to buy.
Taking Immediate Action
The team quickly established Just Do Its—decisions we could implement immediately that didn’t affect our customers and posed no risks to the company. These included:
- No volume buys or Minimum Order Quantities (MOQs) of over three months of usage without purchasing manager/regional approval.
- Weekly reviews and execution on potential supplier order cancellations and returns when demand for a product plummets and before the return window expires.
- No make-to-order purchases without a customer purchase order or Customer Inventory Commitment (CIC) agreement unless a manager approves.
- Scheduling multiple supplier release dates on high MOQ items with key suppliers instead of making single, large-volume buys.
All About the Customer
Once we implemented these and other steps, we began tracking KPIs. The most important KPI related to customer service was reducing the number of late customer backorders. The team reduced this KPI by 23% from when we started the pilot.
Other KPIs we tracked during the pilot:
- Surplus inventory value decreased from nearly 60 percent of total inventory to less than 40%.
- The value of vending machine products unsold for six months dropped by 32%.
- Unreturned open supplier return value plummeted from by over 99%.
- Current unavailable inventory value shrunk 93%, opening up inventory for our customers.
We met our goal of reducing surplus inventory by $1,000,000 six weeks into the pilot and continue to lower the surplus percentage of total inventory.
Birth of a Team
After the successful pilot, we formalized the Supply Chain team to better serve customers with fewer late backorders and timely, accurate supplier purchases. A team of purchasing specialists and purchasing managers now ensure that we are achieving these goals and getting products in stock for our customers.
We’ve also created a new position—Inventory Control Specialist—that focuses on optimizing inventory. This role is responsible for ensuring our system inventory settings are correct and dispositioning surplus products to other locations that need it. They work to reduce backorders to our customers, while optimizing our inventory.
This is an exciting time to be part of R.S. Hughes’ inventory management efforts!