Effective inventory management is crucial to efficiently and reliably fulfil manufacturing orders. Having too much stock means tying up capital and storage space, and risking obsolescence. Having too little means a potential delay in fulfilling orders which can leave customers dissatisfied and potentially going elsewhere, with a detrimental financial impact to the business.
The importance of staying on top of inventory management is clear, but doing so is no mean feat. Furthermore, when using manual processes in-house the opportunity to create efficiencies are most certainly lost. For organisations wanting to reap efficiency and cost benefits, considering options like vendor managed inventory services could be the key.
Navigate supply chain complexities with vendor-managed services
Replenishing low value, fast moving industrial supplies can be a time-consuming task that is fraught with potential issues when managed manually, or in-house, where resource may be stretched. RS’ 2024 indirect procurement report Maintaining Focus highlighted that attracting and retaining procurement talent was a real challenge faced by 29 per cent of survey respondents. It also unveiled that lead time for parts and supply chain issues were a challenge for 19 per cent of respondents, and 28 per cent said they were under pressure to reduce inventory costs.
With all this in mind, using vendor-managed inventory services seems like the obvious solution. For an organisation using a high volume of different components on a daily basis, and from a large number of manufacturers and suppliers, simply repeat ordering isn’t a reliable long-term strategy.
Additionally, ordering from multiple suppliers all with differing purchase order processes and requiring invoice reconciliation, requires a level of resource that many firms don’t have. There is also a risk element in reliability of availability when using so many suppliers.
And when a business may have an order that requires a higher number of specific parts to fulfil, that can add pressure to the existing procurement process and potential issues if those parts can’t be obtained in the numbers or time required.
Using a vendor-managed inventory solution provider means handing over the whole process of stock replenishment. Providers of such services also assess, and continually monitor and analyse consumption data for more strategic, accurate and reliable replenishment.
Bringing lineside cribs of required products, barcoded for replenishment tracking and reporting, helps avoid cash being tied up in excess stock and creates efficiencies for the business. While having fast-moving items close to work areas maintains availability, reduces walk and wait time and negates production stoppages.
Keeping maintenance on track and operations moving
For engineers requiring parts for maintenance tasks to keep operations moving, if the parts they require aren’t available when needed, maintenance time is lost while the engineer sources the parts. But more importantly, the cost of downtime while the part is being sourced means the organisation is losing money by the minute.
Getting into a cycle of emergency ordering of required products leads to a downward spiral of inefficiencies and higher costs, in both the cost of the parts and that of procuring and managing ordering processes from multiple suppliers.
Vendor-managed services can handle the whole stock check and replenishment process, and arrange blanket purchase orders to negate individual product purchase orders, creating a significant time saving. It also gives a business better visibility over the whole parts spend, which can help with budgeting and forecasting.
Even the locating and put away of parts is a task that falls under an outsourced service and helps reduce production downtime. The service can stock check, order, receive, unpack and put-away stock for cost-effective replenishment.
When valuable resource isn’t tied up with raising orders, awaiting deliveries and dealing with associated invoice processing, this frees up resource to concentrate on other important areas of the business.
Removing inventory management strategy headaches
With so many inventory management strategies to consider, finding the right one for the business can be a lengthy and costly trial and error process, and will differ for every business. While some might thrive on a lean just-in-time approach, others may operate best on a minimum inventory level, a perform demand forecasting approach or a regular inventory inspection.
The best approach will depend on the business and operation, but in any case, a level of knowledge is required and resource needed to execute any one of the aforementioned, or other available strategies. With stretched or limited resources and other business pressures, completely passing the responsibility over to a vendor-managed inventory service can help businesses overcome these challenges and focus on other important business operation areas.
There’s no doubt that vendor-managed inventory solutions are helping industrial operators reduce inventory costs, improve reporting and visibility and increase component availability. This is helping to increase efficiencies and productivity, which are key elements in the quest to thrive and grow in a competitive industry. Having the right product in the right place at the right time could be a mission best outsourced.
RS has a range of inventory solutions to help cut waste, improve supply and reduce costs.
For more articles like this, visit our Leadership channel