23 Oct What If Smarter Inventory Management Could Free Up Capital?
There’s a lot of capital tied up in traditional supply chain operations. And in particular, capital tends to get tied up in processes related to managed inventory, goods in-transit, and forecasting for expedites. Until recently, there were few supply chain solutions capable of mitigating these costs and freeing up working capital, but new solutions are emerging.
What if it were possible to adopt an innovative system of inventory management that saved manufacturers from holding excess inventory? How could that capital be used differently?
Inventory On Demand
For manufacturers wanting to free up working capital through more efficient inventory management, Inventory On Demand (IOD) is the solution. IOD is a new method of supply chain optimization that creates a system of end-to-end control through third-party ownership of your goods. This partner takes responsibility of inventory at the factory dock and coordinates with each supply chain vendor to ensure that shipping and transportation are optimized. As the inventory nears its point of consumption, the IOD provider holds it in strategically-located distribution hubs until a customer needs it. This methodology allows manufacturers to time and place shift inventory procurement and deliver goods to customers in efficient and cost-effective ways.
Best of all, IOD does not require any large-scale integrations or risky investments to obtain. IOD builds on supply chain infrastructure already in place and sets the stage for end-to-end efficiency.
Applying Freed Capital
IOD frees up working capital in two key ways:
- Optimizing transportation and distribution processes to reduce supply chain costs and free up revenue for reinvestment in other areas.
- Reducing assets under management that manufacturers are responsible for and allowing businesses to keep inventory off their balance sheets until the moment they’re sold.
When the IOD partner takes title of all goods in transit and at each distribution destination, the manufacturer has the opportunity to minimize its capital deployed on inventory, freeing it up for application in other areas:
- Investments in capital equipment
- Acquisitions or purchases to support manageable growth
- Increased liquidity and reduced dependence on borrowing
IOD actively optimizes the flow of goods at each value adding location and buffers inventory across each leg of the supply chain. This produces leaner supply chains that increase the value of each transaction made—and provide companies with a significant cash advantage over their competitors.
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