20 Nov What If You Could Reduce Lead Time Without Increasing Costs?
When organizations have sprawling supply chains with numerous touchpoints spread across the globe, it becomes difficult to achieve consistently fast lead times.
But optimizing lead times while keeping costs low is a tall order. Most strategies aimed at decreasing supply delays end up producing burdensome overhead expenses that reduce supply chain profitability. According to a 2017 survey by Aberdeen Group, 53 percent of companies agreed that rising supply chain management costs was a top concern for their organizations.
Inventory: Under New Ownership
While traditional inventory optimization strategies struggle to reconcile lead time reduction and cost-efficiency, new strategies such as Inventory On Demand (IOD) are making it a reality.
IOD allows manufacturers to time- and place-shift inventory procurement by transferring title of inventory to a third-party. An IOD provider takes responsibility of completed inventory at the factory dock and works with each shipping and transportation vendor in the supply chain to determine the most efficient routes for delivering goods. As inventory nears the point of consumption, goods are routed to strategically-located distribution hubs where they’re kept until a customer orders them. When this signal is activated, the goods are shipped from the distribution center to the customer’s door.
That last part is key—by place-shifting inventory procurement to distribution hubs near the point of consumption, IOD can significantly reduce supply chain lead time without incurring extra costs.
Less Lead Time for Less Cost
The secret behind IOD’s efficacy is how it leverages in-transit goods as a store of inventory. By moving goods within the IOD provider’s approved network of distribution centers, manufacturers can guarantee continuous product availability to each of their customers. This methodology improves lead time by protecting the supply chain against the inevitable disruptions that occur in even the most optimized supply chains.
Consider the findings of another survey of supply chain leaders that revealed several of the most common inventory flow disruptions present in the typical supply chain:
- Shipping delays, misdirection errors, or damaged goods (27 percent)
- Inadequate supplier or carrier capacity (25 percent)
- Port delays (13 percent)
While no solution can eliminate the world’s delays, IOD prevents disruptions from limiting your customers’ access to purchased inventory. By place-shifting procurement to regional hubs located near the customers themselves, supply chains gain a source of buffered inventory that remains available no matter what supply chain disruptions occur.
Contact us for a free inventory optimization analysis today!