Everyone understands inventory

It’s the stuff sitting on Walmart’s shelves. It’s the frozen pizzas in the freezer. The unsold house in the neighborhood. The empty hotel rooms and empty movie seats. Non-billable consultants are no different. Non-billable consultants should either be selling new projects, or they are inventory.

It’s complex

Inventory can be tricky because it is multi-factorial; there are lots of variables that add to the mess. Products come in different shapes, sizes and requirements. Some require refrigeration and need to be transported in climate controlled “reefer” trailers. Some have a short shelf-life, while canned goods may last several years. Some products have stringent regulatory oversight or environmental requirements. Inventory can get complex quickly.

Wrong stuff, wrong place

It’s quite easy to have too much inventory in one thing, while simultaneously not having enough of another. Likewise, you might have plenty of the item in Washington state, but none in Washington DC.

Inventory is all about trade-offs

Like most management decisions, there is not a simple answer. The average grocery store will have 50,000 unique stock keeping units (SKUs) that it needs to stock, price, and current current. The number of products that should be kept for each SKU depends on a number of factors: geography, seasonality, pricing, trade promotion, and of course, customer preference.

There many different costs to having too much or too little inventory. Like the fairy tale with Goldilocks, you don’t want the porridge to be too cold or too hot – just right. It can be a bit of a dilemma, often with only approximate right answers. This often requires a significant amount of data analysis, modeling, and software. Some of the big supply chain management vendors are JD Edwards (now owned by Oracle), Red Prarie (owned by JDA), Manhattan Associates, and SAP.

As with much forecasting, you work with the data you have, be explicit in your assumptions, build-in flexibility, and continually course correct. From a consultant’s perspective, this is 80% driven by data and forecasting models, with 20% being roughly allocated to experience, intuition, and some luck.

Too much inventory

Too much inventory means that you are tying up your capital unproductively in product that sits idle. You are paying for things to sit there, where they are more likely to rot, break, get stolen, become obsolete, or get lost.

Too little inventory

This problem can become very apparent, very quickly. Retailers stock out of the product and only have empty shelves to show for it. Unhappy customers buy substitute brands.  Competitors giggle and make money.

For consulting firms, people are assets

When clients ask for help from accountants, lawyers, architects, consultants, they are essentially asking for people. Crudely put, they are “renting” people for their knowledge, experience, business savvy, ability to influence change, and get things done. As a result, when professionals are not billable to clients, they are like inventory . . . waiting to be “rented” to the client.

“On the beach”

This is consulting jargon, when you are between projects. While newbie consultants might like the way this sounds and find it to be a nice break from the grind of client travel, it is a pretty misleading term because idle consultants = no billing.

Consultants that are not on billable client engagements are inventory – waiting to be taken off the “beach” and deployed at the client. Most consulting firms have utilization targets so the finders, minders, and grinders know how much they should be billable. It’s pretty typical for analysts, consultants, and senior consultants at the Big 4 to be expected to be utilized or billable for 80-90% of the time. Basically, stay off the beach.

Matching consulting supply and demand

As a managing partner of a consulting office, imagine how difficult it is to anticipate and react to client demand. Demand is unpredictable. Most consulting firms use software to evaluate the probability of projects and try to massage the pipeline of proposals.

 In a perfect world, you could anticipate demand:

• The timing of the projects (when it starts, how long it will continue)
• The industry and the function (e.g., oil and gas finance, technology supply chain)
• The number of resources and skill level (e.g., 2 managers, 5 analysts)

In a perfect world, you could rely on perfect supply.  Plug-and-play resources:

• Consultants of all industry, experience and skill level are available
• No consultants are currently staffed on projects
• No consultants are on vacation, getting married, or are on maternity leave
• All consultants would live in the town of the client (low expenses)
• Consultants all work together well; interchangeable, no personality glitches

In real world, staffing is as much dark art form as it is science:

• Clients take months to make decisions, then want it started immediately. It is wait-wait-rush.
• Projects get delayed or extended. There are “add-on” sales
• No two consultants are identical; we all have different skill sets and experiences
• Consultants are managing their own careers and may not want to do the same type of project twice. They don’t want to be pigeon-holed.
• The best consultants are usually staffed; good people are hard to find.
• Cliques form.  Certain people like to work together, while others don’t.

Talent-on-Demand

Wharton professor Cappelli has written extensively about using how companies should think of their talent more flexibly. Instead of talent planning 5-10 years out, HR departments should be thinking about “talent-on-demand”. He recommends that companies build in flexibility by:

• Identifying people’s capabilities, know where to find the talent
• Cross-training people for diverse roles
• Teaching and preaching flexibility
• Understanding the fully-burdened costs of repeated hiring / firing / hiring cycles

. . .Organizations will often say they have a “deep bench.” Yet a deep bench in a supply chain is a costly way of preparing for demand. “The same applies to traditional succession management—you’re paying people to essentially ‘sit on the shelf,’ ”  – Capelli

Consulting firms are ahead of the curve

Unlike most Fortune 500, consulting firms are entirely focused on their people. People are their asset, and they are keen to maintain a high return on assets (ROA). Namely, consultants will be utilized, billable, and productive. They are going to minimize the time that consultants are “on the beach” and acting like inventory.

Seasoned consultants know that getting staffed is a skill

Do great work. Keep in your ear to the ground to hear about good projects (fun team, smart clients, cool city, reasonable hours, high visibility client, meaningful work). Manage the timing that you “roll-off” your existing project. Tell your counselor (or coach) what your goals are. Be explicit to the people staffing the project, “I wanted to be staffed on your project.  I will do a great job because XYZ.”

It’s a marketplace

Getting staffed is a market place. Know what you are selling, know who you are selling to. Be clear and loud about the benefits of the product (you). As Seth Godin says, “Be Remarkable“

Related Posts:

• 10 reasons why supply chain is not boring
• Lean means no waste. No TIMWOOD
• Consultant, what’s your leverage model?