Melburn Whitmire's Whitmire Distribution, a wholesale pharmaceutical distributor based in Folsom, Calif., spent three years developing a high-quality inventory-management system, which Whitmire provides at no charge to his 7,000 customers. Here's advice for any business setting up an inventory-management system:

* Concentrate on high-turnover items. Whitmire divides his customers' products into four categories, depending on how quickly they have turned over historically. Then he recommends that the customers' managers analyze products "every way imaginable, from the size of financial investments in them to their turnover cycles," to look for ways to reduce inventory.

* Test your information. To make certain his biggest customers -- pharmacies and hospitals -- could easily track their orders, turnover rates, and storage costs, Whitmire test-marketed his method with a group of customers as well as with his own key managers. Many customers have been able to reduce on-site storage needs by as much as 40%.

-- Jill Andresky Fraser

* * *