16 Oct Reducing Supply Chain Inventory with IOD
Poor inventory management is a major contributor to supply chain cost. Traditional inventory management processes, while effective, leave several logistics and performance gaps that can reduce an organization’s profitability:
- Global process inconsistency among supply chain partners
- Forecasting errors related to overproduction of inventory when demand is low, and the need for high-cost expedites when demand is high
- Increased liability from holding excessive assets under management throughout the supply chain lifecycle
Naturally, with so much value resting on supply chain performance, it’s understandable that supply chain executives are hungry for solutions that can fill these gaps and provide their organizations with a more efficient system of inventory management.
The Inventory On Demand Advantage
New solutions for inventory management are emerging in the market that take the uncertainty out of the supply chain equation: Inventory on Demand (IOD).
IOD is a revolutionary system of inventory management that minimizes inventory and, as a result, optimizes throughout the entire supply chain. Unlike other systems of inventory management, IOD involves a third-party provider taking responsibility of inventory at the factory dock and managing it throughout the entire supply chain. When a customer needs goods, a pull signal is activated and the inventory is shipped to the customer’s door.
For manufacturers, this type of end-to-end inventory control can be powerful at supporting supply chain efficiency:
- Certainty – Manufacturers can leverage in-transit goods as a new store of inventory, reducing the need for expedited shipping and supporting a supply chain based on predictable demand rather than forecasting.
- Reduced risk – Supply chain executives can reduce their assets under management and free themselves of the burden of worrying about the state of inventory shipments. With an IOD partner managing goods throughout the supply chain, quality and inventory security are guaranteed.
- Balance sheet health – Inventory is kept off the balance sheet until a customer is ready to purchase, allowing manufacturers to report inventory only as it is sold. This improves balance sheet efficiency, particularly during key reporting periods.
IOD Means Supply Chain Certainty
The primary benefit of IOD is its unlimited flexibility of inventory management. Manufacturers can buy and sell goods on the same day, and can wait to report inventory on balance sheets until a sale has already been made. This system helps take the guesswork out of production and increases inventory availability, all without increasing costs. A supply chain powered by IOD and its strategy of leveraging in-transit goods as a store of inventory will be able to provide near instantaneous delivery of goods to customers. Through IOD, supply chain executives can achieve inventory reduction, less transportation liability, and increased service level performance across the board.
Allow our team of optimization engineers to perform a free analysis of your supply chain. Click here to request yours today.