Welding and Gases Today examines pitfalls of reducing stock.

Press Release Summary:



In Winter 2010 issue of Welding and Gases Today, Albert D. Bates, Ph.D., confronts tactic of overcoming cash challenge by reducing inventory. He notes that reducing inventory investment, while "a laudable objective," can also "trigger further sales declines through higher occurrence of out-of-stock situations." Report goes on to examine trade-offs between sustaining sales volume through acceptable level of inventory as opposed to retaining too much cash in assets.



Original Press Release:



The Impact of Inventory Reduction on Gases and Welding Distributors



Albert D. Bates, Ph.D., examines the pitfalls that can occur when reducing stock.

Dewitt, NY: With sales down during the recent economic downturn, many distributors in the gases and welding industry may have been tempted to reclaim cash by eliminating inventory. In the Winter 2010 issue of Welding & Gases Today, the leading provider of information to the welding and gases supply business, Albert D. Bates, Ph.D., challenges the tactic of overcoming the cash challenge by reducing inventory in an article directed at members of the Gases and Welding Distributors Association.

Bates says, "While reducing the investment in inventory is a laudable objective, it is fraught with some danger. It is possible, and maybe even likely, that the drive to lower investment levels will trigger further sales declines through a higher occurrence of out-of-stock situations."

Bates' report goes on to examine the trade-off between sustaining sales volume through an acceptable level of inventory as opposed to retaining too much cash in assets. While a modest reduction in inventory might yield an increase in cash, it could also lead to lowered sales volume. Bates uses a chart to illustrate that if an inventory reduction results in a correlating loss of sales, the result can be severe. "The firm still has more cash in the short run, but is mortgaging its sales future," says Bates.

He does offer some advice for firms that must reduce inventory, advising that it be broken down into "pockets of opportunity." Bates offers a sample that shows limited reduction in faster selling items scaled against a higher percentage reduction in slower selling items. "Over time, this will produce the inventory reduction required to generate more cash," Bates says.

About GAWDA
Founded in 1945, the Gases and Welding Distributors Association (GAWDA) is the premier source for manufacturing knowledge, education and networking. Through its member journals (weldingandgasestoday.org), e-magazines, newsletters and industry wiki (www.gawdawiki.org), GAWDA connects suppliers of gases and manufacturers of related equipment as well as manufacturers of welding equipment and distribution leaders, for the purpose of safely delivering optimal solutions to the users of those products. GAWDA publications are the industry's voice for all matters related to the latest technology and the most up-to-date processes spanning welding equipment and products and services related to industrial, medical, specialty and cryogenic gases. A 501(c)3 organization, GAWDA members are located throughout North America.

All Topics