30 Oct What If You Could Time-Shift and Place-Shift Inventory Ownership?
In a perfect world, manufacturers with global supply chains would be able to keep inventory off their books right up until it is sold—and deliver those goods to customers from local distribution centers to provide the fast delivery that customers expect.
And while the supply chain world isn’t yet perfect, new strategies are emerging that give manufacturers more options for reducing supply chain costs and meeting the service level expectations of their customers. For example, what if manufacturers could achieve time- and place-shifted inventory ownership as described above? How much could each manufacturer save, and what other benefits might this strategy provide?
Inventory On Demand
Inventory On Demand (IOD) is a new system of outsourced supply chain management that makes time and place shifted procurement a reality.
IOD involves a third-party provider taking responsibility of inventory at the factory dock and managing its flow through each touchpoint in the supply chain. After securing the inventory title, the IOD provider works with each supply chain vendor to identify the optimal shipping procedures and transportation routes for inventory delivery. As the goods near their final consumption point, the IOD partner routes each shipment to strategically-located distribution hubs, where inventory is kept until it’s purchased by a customer.
Match Production with Consumption
Time- and place-shifted ownership is a key advantage of IOD. By holding active inventory in regional hubs near consumption points and distributing it based on pull signals, manufacturers can deliver goods faster and at lower cost than traditional inventory management strategies allow:
- Place-shifting ownership so that the OEM takes ownership of the goods as close to the customers as possible. In essence, IOD moves the factory right next to the customer’s door.
- Time-shifting ownership by holding inventory until customer purchase means that manufacturers can better match inventory production with consumption. This reduces inventory carrying costs, balance sheet inefficiencies, and forecasting errors.
Overall, IOD improves cash flow by allowing a partner to actively manage the supply chain from end-to-end and identify all areas of inefficiency. By tightening these workflows, manufacturers de-stress their supply chains and free up capital that can be used to expand manufacturing capabilities, support capex ventures, or be reinvested in the supply chain’s working capital. And this additional capital can be significant: Depending on the business, IOD solutions can provide overall cost savings by as much as 30 percent across the board—all through a new system of inventory management that lets manufacturers produce, distribute, and sell inventory only as it’s needed.
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