Nothing is off the table when Michael Kinney, director of global sales for Autopart International, engages his college pupils about industry events. Kinney, who splits his duties between the import subsidiary of Advance Auto Parts and teaching aftermarket studies at Northwood University, reveals the students’ outlook on inventory management as they ready their careers. And for Kinney, who covers the real-world challenges with them, he’d much prefer to fold in as much personal experience over the theoretical. Here’s Kinney’s read on what keeps the Northwood students talking.
What key best practices for inventory management and distribution are you and the students at the university discussing?
This is an ongoing discussion for every business. We're encouraging the students to think about best practices from the start. As they progress through their education and are learning more about how product moves through the system, we're analyzing inventory hierarchy, pick and pack processes like batch, wave, and zone picking. We're talking about metrics that address inventory turns, order status and tracking, as well as carrying costs and write-offs. We talk about the importance of reorder points and safety stock to avoid lost sales and disruption to the customers we serve.
Sales and market share always get all of the attention. How much emphasis do you put on other areas of distribution?
While driving sales and growing market share are important, other factors make that possible. As a university, we focus on the whole business. Supply chain, category management, logistics, and manufacturing processes fall into the in-depth focus for the curriculum at Northwood University. With what's happening globally today, sourcing products from the manufacturing plant in a foreign country to the shelves in the U.S. is critical. The efficiencies can impact bottom-line results. Divesting from China and finding new sources for product supply is important for the future. We're focusing on the current issues that the aftermarket faces. Raw material costs, ocean freight, port congestion, equipment shortages, and right-to-repair legislation are key for what we are studying. I recently heard an industry leader say that proper supply chain management and finding people with those skills is more important than finding people to work in marketing. This example shows you that our industry is evolving.
What’s your outlook on inventory management, and what tactical approaches are you and your collaborators recommending?
Inventory management is described as the bedrock to success. If you can organize and prioritize inventory, the rest in supply chain management fits together as a jigsaw puzzle. The inventory goal is to increase turnover while reducing excess stock. Having the right products in the right place at the right time is an essential and sound management practice. Nobody, however, should sell from an empty wagon. If you lack the product or quick access to it, you open the door for someone else. There are many tools in the marketplace to help companies with multi-channel management, product identification, supplier, warehouse management, and more. The last thing a business wants to do is tie up cash in inventory and sit on the shelf.
Considering shipping disruptions caused by the pandemic and freak events like the container ship that blocked the Suez Canal in March, are we over-dependent on just-in-time manufacturing that eliminates excess supply?
Many Northwooders are introduced to supply chain management, including the “lean” concept. They are savvy about product flow and waste. Managers should be attuned to conservation at every level. It’s an ideal efficiency strategy. While we appreciate that JIT production strategy is beneficial, we rarely address the disadvantages. Excess supply reduction from raw material to finished goods carries three risks. First, is the inability to handle large orders, which may force the customer to seek another supplier. Next, is the inflexibility to respond to unexpected increases, which are called demand shock. It may cause delays in manufacturing and upset customers. Thirdly, consider supply shock. Catalytic converter pricing is tied to the raw material costs, namely rhodium and palladium. It now trades at record highs and has spurred cost increases across the supply chain, oftentimes on short notice.
The pandemic, item shortages, and now the canal situation highlights the need to have multiple product sources and divest from China into emerging markets to maximize a competitive edge. India, Turkey, Brazil, and Vietnam are seeing much growth. Our dependency on China is like relying on one customer. If something happens with that account, your business is crippled.
What best practice questions should retailers and wholesalers be asking when it concerns unforeseen events?
It's all about meeting customer demand and pivoting in new directions to keep the product flowing. Retailers and wholesalers alike should ask how they can transform into more nimble and more agile operations for the future. Many companies need to redefine their operations around product sourcing and supply chain management and begin asking tough internal business management questions. That's the only way we'll be able to fix the internal issues facing every company as we move forward. The companies with the best thought leadership and strong employee empowerment will shine.
