P2 Business Basics: Purchase and Inventory

Think about how you purchase materials. A large inventory ties up money that might be needed elsewhere in your business. Stockpiling materials also increases the opportunity for leaks and spills. If you are accounting for all the costs associated with the supply chain, you should also consider environmental costs. EPA's Environmental Accounting (pdf) information can help identify these costs. Additional information on environmental accounting methods and success stories can be found Lean and Green Supply Chain: A Practical Guide for Material Managers and Supply Chain Managers to Reduce Costs and Improve Environmental Performance (pdf).

Order materials in appropriate unit sizes to reduce your inventory

• Buying in bulk is only efficient if you are able to use all the material

Buy materials on an as-needed basis.

• Reduces the amount you have to store and reduce the opportunity for leaks
• Stockpiling materials also increases the opportunity for leaks and spills

Inspect all materials upon delivery.

• Do not accept materials that are damaged, have an odor, or show signs of leakage
• Broken packaging or expired materials may increase your waste load

Stock all materials on a consignment basis.

• Have your vendor rotate materials so they don't become out-of-date
• Ask your supplier if the material has an expiration date tohelp determine how much you can use before it becomes out-of-date

Make arrangements to return expired material to supplier.

• If you decide to use out-of-date material, test a small amount for effectiveness first

Make sure your supplier provides a Materials Safety Data Sheet (MSDS) for each hazardous material.

• Employees who could be exposed to the hazardous material used in your business should know the location and purpose of the MSDS and be familiar with the information on all products they are using
• The posting and use of MSDS are required by the Occupation Safety and Health Administration (OSHA).

Check that all purchases have legible labels.

• Increases efficiency
• Reduces the chance of using the wrong material

Rotate stock and use on a FIFO (first in-first out) basis.

• Reduces the chance that materials will deteriorate in storage

Track the amount of materials used by keeping good records.

• Allows you to measure whether the proper amount is being used

Factor in environmental costs when purchasing materials.

• Raw materials that generate hazardous waste cost more than just the purchase price