Positive Churn #2 - Cash Belongs in the Bank, Not in the Warehouse

By Clive Birnie | April 15, 2019

Originally published by Clive Birnie on the Positive Churn Blog, 11th April 2007

I have a customer who cannot understand why our warehouse is so small. Our reluctance to hold months of raw material cover is similarly met with bemusement. But it is simple:

Cash belongs in the bank, not in the warehouse.

If we make the warehouse bigger there will be a danger that someone will put more stock/cash in it.

I remember a conversation with my colleague Karen Andrews, a Severn Delta stalwart, back in Jan 2004 during the whirlwind described in “You Can’t Grow Your Way Out of a Hole 2.0”:

“You are getting really good at just in time manufacturing” I complained “but can I have a little more just in time purchasing to go with it.”

It was one of those moments when you see the light bulb go on. Sure enough stock came tumbling down in short order.

We don’t always get this right and to be honest stocks are clmbing again at the moment but it is in my sights and will get dealt with.

It seems simple and natural but maybe its another instance of having to go there to come back. Repeat after me:

Stock is the enemy. Stock is the enemy. Stock is the enemy.

© Clive Birnie, 2007 - published with permission