Purchasing and inventory management
systems, whether they are simple or
complex, are at their core a system of
rules for deciding when to purchase materials
and services and how much to purchase. These
two basic decisions can dramatically impact
your sales and customer service performance,
lead-time, cash flow, shop and field scheduling,
cost structure, and the size of your facility.
Sheet Metal Contractors generally use a buildto-
order business model that has its own unique
rules for managing purchases and inventory
levels. Many strategies and practices used in
repetitive manufacturing cannot be effectively
applied directly; but their concepts can.
All purchasing and inventory planning
systems must start by understanding the time
constraints of your customers, competitors,
suppliers, your fabrication shop, and your
installation crews. Once you’re awarded the
job, what is the availability of the materials
needed, i.e. the lead-time required to purchase
and receive them; then fabricate your items,
and install the work? If this total elapsed time
is longer than the customer is willing to wait for
the work to be completed, then you’ll need to
look at inventorying long lead-time materials
and/or components. Understanding this concept
is the basis for determining what should be
inventoried vs. purchased on demand when you
are awarded the work.
For any business “Cash is King”. Many
profitable companies struggle because of
their inability to manage cash flow effectively.
Cash flow is the movement of cash in and out
of the business, i.e. Cash-in (receivables) is
customer payments both progress and in-full,
Cash-out (payables) is payroll, the rent or
mortgage payment, utilities, and the purchase
of materials, supplies, tools, subcontractor
services, etc.