28 Aug What If You Could Have Instant Inventory?
Greater capacity is an understandable goal in supply chain optimization, but current the current state of inventory management makes it nearly impossible to achieve. Businesses struggle to meet customer needs during periods of peak demand, and they invest substantial sums in increasing capacity to meet this demand. These businesses usually end up overproducing when demand falls. This reactive system has been historically poor at matching inventory with consumption and exposes supply chain executives to increased liability from excess inventory on balance sheets.
But what if there was a way to guarantee efficient allocation throughout each step of the supply chain? Imagine a world in which your supply chain could instantly give you exactly what you need, where you need it and as soon as you need it. That’s exactly the promise of new solutions that are appearing on the market to help the guessing game of inventory allocation become a thing of the past.
A New System of Inventory Management
Research indicates that the top quartile of supply chain managers spend 4.2 percent of their revenue on supply chain costs, compared to the industry average of 10 percent. And while these numbers are impressive, most are still working within a Vendor Managed Inventory (VMI) system. Though VMI can be effective, it’s not the solution for every problem. Supply chain executives who think outside the VMI box can see even greater profitability and cost reduction than even the top performers surveyed.
This is where Inventory on Demand (IOD) comes in. Rather than relying on the workflows of each individual vendor in the supply chain, IOD transfers inventory ownership to a third-party, which takes agency over it until the point of final customer fulfilment. Think of it as the next step in the natural evolution of VMI. IOD builds on the infrastructure established through VMI and optimizes the flow of goods to support supply chain quality and efficiency.
Broadly, the benefits of IOD-based supply chains include:
- Improved quality standards that guarantee on-time fulfilment through maximal transportation efficiency, resulting in reduced lean time production and distribution
- Reduced working capital that can be applied to improve the broader capabilities of a supply chain, improving cost savings and overall supply chain profitability
- Decreased liability of goods ownership for supply chain executives, resulting in decreased assets under management
Your Systems Are Already In Place
IOD may be a revolutionary new way of supply chain optimization, but it doesn’t require any integration of business units that aren’t already in place. IOD can operate as the natural next step for VMI-based supply chains, working within the infrastructure and workflows that already exist. There are no large-scale integrations or risky investments needed. By collaborating with third-party IOD providers, those responsible for global supply chains can accelerate supply chain responsiveness, increase revenue growth, and generate excess quality capacity—all of which results in improved customer satisfaction.
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