By Stan Rosenzweig

You and Pfizer have a something big in common and, no, I don’t mean Viagra. I’m talking about the oversized drain on cash due to your swollen investment in non-performing inventories.

According to the Wall Street Journal, Pfizer has between one and a half and five billion bucks that could become available to them, if they simply got a little smarter about managing inventory. Merck could free up as much as two billion. Imagine wasting all that purchasing power by tying it up in slow turning inventory, not to mention the cost of warehousing.

Being more efficient about inventory management is just like finding stacks of un-invested money lying around. Just like at Pfizer, if you can reduce inventory on your books by 20%, you could pay off bills, invest in more efficient processes, develop new products and otherwise finance your business.

Most of us may not have that much cash lying around our warehouses, but, let’s face it, how would we know? Poking through our books for items that have been on the shelf way too long isn’t that high on our to do list even though it should be.

Why do we often fail to acknowledge to ourselves that we even have a problem? It’s like that printed barroom tee shirt that reads, "I don’t have a drinking problem. I drink, I get drunk. I fall down. No problem." That’s most of us, in denial and in need of a 12 step recovery program for inventory abuse.

Here’s how to get on the road to recovery: First, look at your materials by "date in" and "date out". How long has each item has been sitting in inventory sapping cash away from more profitable investments? Have a sale and mark down everything that can’t be quickly sold full price. Even at a smaller profit, cash in your pocket beats cash on the shelf.

Second, look for inventory that has been staged at job sites for more than a few days. Inventory bought too soon, ties up cash as it waits to be installed. Worse, excess inventory never gets pulled back after each job is finished. That’s your profit sitting there instead of in your bank account. Come on, don’t you sometimes wonder how come sales are up and your making money, but you don’t seem to have enough to pay bills, or yourself? The profit is still on site.

Dell won the computer wars, in part, because they found a way to use their money more efficiently than IBM and Compaq. They pioneered just-in-time inventory for computer manufacturing and were able to sell tons of PCs before they had tons of cash.

Fix it, or unmanaged inventory will hurt you; and even Pfizer knows that the cure can’t be found in a pill.