12 Jun The Untapped Inventory On Demand Gold Mine That Virtually No One Knows About
Despite the promise of the modern manufacturing supply chain in a globalized market, the typical supply chain is rife with inefficiencies. And when manufacturers have annual revenue in the millions, the costs of this unproductivity adds up quick.
There’s plenty of room for improvement in the average manufacturer’s supply chain, from reconciling the goals of just-in-time delivery and minimum inventory to coordinating the most efficient transportation processes among regional suppliers.
It may sound like a tall order for those unfamiliar with cutting-edge supply chain optimization strategies, but manufacturers that think outside the box stand to unlock a previously untapped gold mine of value.
The Secret Value of Inventory On Demand
For those manufacturers who believe that their supply chains are already optimized, there is still opportunity if they haven’t yet heard of Inventory On Demand (IOD).
IOD is a comprehensive inventory management service that outsources ownership to a third party, so the manufacturer is free to optimize the flow of goods—without worrying about buffers and cost. Although it sounds simple on the surface, IOD unlocks tremendous value for manufacturers by completely changing the way their transportation and distribution are handled.
IOD works by streamlining of the supply chain from the factory floor all the way to the point of consumption. The first problem with traditional supply chain infrastructure is that transportation decisions are often left to each supplier. When each of these suppliers acts in its own best interest, it’s impossible to guarantee an efficient system that keeps costs low for OEMs.
IOD changes the game by shifting ownership—and often control of transportation and distribution—to a single third-party provider. Doing so ensures that transportation decisions are consistent across the entire shipping process and that goods route through the most efficient channels possible. End-to-end inventory management reduces shipping inefficiencies and lessens transportation costs for every order sent.
Aside from the control that IOD offers over the supply chain, it also provides benefits on the inventory management side. Manufacturers can reduce capital deployed on inventory by changing the way manufacturers assess their owned goods. Consider how much money might be unlocked for other uses if a manufacturer could remove just one day from its inventory ownership.
While traditional systems of inventory management recognize raw goods or goods in progress, they don’t account for goods in-transit. However, in-transit goods are a valuable store of inventory that IOD leverages for shipping alacrity.
When in-transit goods aren’t accounted for, manufacturers lose flexibility in order fulfillment. This loss means wasting money by overstocking unused goods or failing to produce enough to meet consumer demand—resulting in expedited shipping and increased transportation costs. And while buffering inventory at key locations is also an option, this too produces extra carrying costs and isn’t suitable for supply chains that must stay lean, responsive and consistent.
IOD minimizes buffered inventory throughout the supply chain and improves inventory level performance. Inventory in-transit can be leveraged to fulfill consumer demand at a faster rate than any traditional store of goods, and thus eliminate the need for expedited shipping while allowing all customer orders to be fulfilled immediately—improving revenue and customer satisfaction all in one move.
Balance Sheet Visibility
On top of the value provided by end-to-end management and financed inventory, IOD also gives manufacturers better control over their balance sheets.
There are many hidden costs in the typical supply chain, involving everything from hiring to warehousing, import / export fees and even the IT systems that connect providers with one another. These costs produce inefficiencies that are difficult to track and end up hurting manufacturers during key reporting periods.
IOD management services expose these hidden areas of inefficiency and make all costs clear for manufacturers. Balance sheet transparency decreases risk and allows manufacturers to save valuable time and labor combing through reports to identify from where their expenses are coming.
A Supply Chain Gold Rush
Managed inventory services like IOD are set to disrupt the outdated supply chain business model, and manufacturers are quickly jumping on board.
The third-party ownership widens a manufacturer’s forecast error latitude at no extra cost, contributing to a diverse range of competitive advantages out of the gate:
- End-to-end inventory management that guarantees efficient and reliable distribution of goods
- Inventory financing that gives manufacturers complete control over in-transit goods, reducing the need for extraneous shipping costs related to last-minute customer fulfillment
- Balance sheet visibility that exposes hidden areas of inefficiency and unaccounted-for costs
Not all manufacturers may be ready to flip the script on inventory management, but those that do will find more value and better service agility than any other provider on the market.
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