03 Jul Unlock Distribution Efficiencies with Inventory On Demand
A global organization’s supply chain can be tough to tame. Across the myriad challenges related to inventory management, international transportation, and order fulfillment, the average business’s supply chain has plenty of room for improvement but lots of barriers to achieving it.
While inventory management contributes the most to supply chain cost savings, it’s not the only area that can diminish the ROI of an organization’s service. Distribution—the transfer of goods from finished goods warehouses centers into the hands of consumers—is a part of the supply chain that often drags Original Equipment Manufacturers (OEMs) down due to its inherent logistic challenges.
Leveraging Inventory On Demand
Rather than trusting decades old supply chain management advice, business leaders seeking a competitive edge should look to newer solutions—such as Inventory On Demand (IOD).
IOD is a revolutionary system of financed inventory that allows manufacturers to optimize inventory management and guarantees that no efficiency is lost during inventory transportation or distribution.
The secret is in the end-to-end control of the supply chain that IOD provides. From the initial manufacturing location, all the way to the customer’s front door, IOD optimizes the flow of goods within a supply chain in ways never-before possible to extract the maximum amount of value from the process. It’s not an exaggeration to say that end-to-end inventory management services produce the same effect as moving a business’s factory right next door to its customers.
Optimizing Distribution Channels
IOD includes a new approach to inventory distribution. By reviewing a business’s current infrastructure and performing continuous assessments of operations data, IOD providers can develop a “smart distribution” strategy that allows manufacturers to get their products into their customers’ hands faster and more efficiently than ever before.
Under the typical supply chain model, completed goods are shipped directly to customers from a central location (usually near manufacturing plants or other production locations). This process provides simplicity and visibility but takes a shortsighted approach to the value offered by optimized distribution.
Individual shipments of goods to the point of fulfillment stick a business with high integrator shipment costs, duplicative import and export fees, and a lack of regionalized distribution. On top of these expenses, individualized shipments produce significant logistic drawbacks, as the average value of each shipment and the shipment method itself are treated the same regardless of what’s included in the order. In these cases, businesses trade standardization for efficiency—a trade-off that usually results in failure to forecast consumer need, redundant investments, and the need for expedited shipping to maintain service levels.
Compare this with the distribution system offered by IOD providers. End-to-end inventory management means that 3PLs take ownership of the goods at origin and determine the optimal routing configuration to deliver shipments on time without the need for excessive inventory buffering.
Part of this process includes the use of regional distribution hubs located near the eventual point of fulfillment. Instead of shipping goods individually to consumers, IOD works by mapping shipments to customer density, putting goods close to where they’ll likely be consumed. Consolidating orders in this way postpones the use of integrators until the final domestic shipment leg and minimizes the costs associated with shipping and exports.
This results in fewer costs for each shipment, less capital tied up in inventory, and stronger service levels overall. Plus, optimized transportation supports sustainability and reduces an organization’s carbon footprint.
Unlocking Efficiency with IOD
A key advantage of IOD is that OEMs face no additional liability for the privilege of regional fulfillment. When using IOD services, the OEMs cede ownership of goods after they’re completed. This reduces the number of assets under management that supply chain VPs must worry about without sacrificing product availability.
In truth, distribution is just one of the many areas of supply chain logistics that IOD supports. Businesses seeking a competitive edge and increased cash flow should consider how IOD can improve the performance of their supply chains, from the initial stages of manufacturing to domestic distribution routes and everything in between.
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