8 Wastes in Golf: Inventory

Golf InventoryA few weeks ago I started our discussion on each of the eight types of waste seen in the golf industry, beginning with a commentary on the waste of Transport. I will dive deeper into each of the 8 wastes -- Transport, Inventory, Motion, Waiting, Over-Production, Over-Processing, Defects and Skills -- in a series of posts on this blog. Where appropriate, I will also offer my suggestions to reduce and/or eliminate excessive waste in each category. I hope you will join the conversation by posting your thoughts in the comment section below.

This week we continue our discussion with perhaps the most obvious waste seen in the golf equipment industry today: the waste of Inventory.

What is the waste of inventory?

The waste of Inventory describes any excess of raw materials, work-in-progress (WIP) or finished goods stock that is held for far longer than what the customer demands (commonly referred to as the Just-In-Time principle). Simply put, the waste of inventory is simply having too much "stuff" on store shelves and not enough customers to buy it.

How does this relate to the Golf Equipment Industry?

I think we can all agree that the current state of the golf equipment industry exemplifies this type of waste.

Think of any Golfsmith, Golf Galaxy, or Dick's Sporting Goods store you've ever been to. Traditionally, you will see new products along the outer perimeter most likely displayed on a wall or in small club racks (especially in the case of drivers and woods). For new inventory, this is actually a very lean method to display a product. After all, you don't see mountains of new irons stacked on top of one another. There is usually only one -- maybe two -- display model of a new set of irons for you to try.

The same cannot be said for the clearance rack. These sections of the store are usually much more muddled and disorganized, featuring a cornucopia of different brands and club types waiting for a customer to buy them.

Second-hand stores are even worse in this regard. Play-It-Again Sports -- a popular used sporting good retail chain -- could very well have been named Golf Club Graveyard. Layers upon layers of golf clubs from years past litter these stores' shelves, often going months or years without being purchased. Before too long storeowners must unload this excessive inventory by either donating the equipment or simply throwing it away. Either way, you're dealing with a form of waste.

How is this wasteful?

Every piece of inventory you hold comes with a physical cost to store it. It doesn't matter if we are talking about pharmaceuticals, car parts, kitchen utensils or golf clubs. If you are a business owner, you are paying someone for the space to store all of your inventory. Every penny that you tie up in inventory is one penny less that can be used elsewhere in your company. This is simple business economics.

There are also hidden -- and sometimes more serious -- forms of waste within inventory. You have to pay employees to keep track of your inventory. You have to maintain the shelving, containers, security protocols and overall environment of the space used to store your stuff. Overproduction -- another type of waste -- goes hand-in-hand with inventory as store owners cushion their product volume with a 'comfort stock.' All of this costs money.

So what is the solution?

As always, this is not an easy question to answer. From a Lean Six Sigma perspective, the first step would be to compare actual product sales against inventory volume to determine if there is a statistically significant difference in dollars spent. It would be helpful to break this comparison down by quarter, especially around "busy times" immediately before a new product release.

While I do not have direct access to this type of information from OEMs, past experience suggests that most golf clubs rarely sell out, even within the first few months post-release. On one hand, this is exactly the scenario that companies want: inventory is high enough to prevent people from having to wait to buy their product. On the other hand, most of the new clubs will not be purchased, causing excessive inventory and the snowball effect explained above.

The best possible solution, in my opinion, would be to go to a direct-buy, Just-In-Time production model where golf clubs are made and sold on a 'made-to-order' basis. Allow customers the opportunity to demo a club at their nearest golf retailer, but then require them to purchase "their" club direct from the OEM.