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Benefits to Utilizing an Inventory Management System

Kendall Paradise - President
Written by Kendall Paradise - President
Posted on March 22, 2018 at 10:00 AM

With the uncertainty the global economy has brought over the last decade, it has been challenging for many companies to balance the fine line of just-in-time (JIT) inventory management, being line down, and being over budget on inventory numbers. We live in a world where next day delivery of virtually anything has become a guarantee, or at least an expectation.

In order to mitigate costs, leverage your spend, and have parts on your dock when you need them, you are going to need to have a manufacturing partner that can customize their inventory management to your particular needs.

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Advantages of an Inventory Management System

The biggest advantage to any inventory management system is that the supplier is assuming the holding costs for your product until the moment you need them. It is mutually beneficial to the customer and the supplier to have a purchase order in place for the largest volume of parts possible. This controls manufacturing costs and allows product to ship off the shelf, rather than in quick-turns with fluctuating manufacturing capacity.

As you are looking to develop your inventory management with your suppliers, it is a good time to look at the benefits beyond just a volume piece price.

1. Locking in your Costs:

In addition to getting the best volume price, inventory systems will lock you into an annual PO. As currency rates fluctuates daily, oil and gas prices swing violently based on capacity, and gold and metal costs continue to go up and down, it is assuring to know that you can trust the cost of your product.

Anyone who has bought product directly from Asia knows that without this type of contract in place, it is common for pricing to fluctuate from order to order, as close as 30-days apart, at the supplier's discretion. That makes it difficult to determine your own profitability.

2. Global Supply Chains:

Global supply chains provide countless advantages across every product line. They also provide an increase in risk and exposure if you don’t have strong Inventory management. In the last six years we’ve had to manage our manufacturing around a coup in Thailand, a tsunami in Japan, countless typhoons and landslides in both mainland China and Taiwan. These horrible events can’t be planned for but can impact your entire supply chain.

Utilizing a Kanban management system with your suppliers can limit your exposure and keep your business running during those challenging times.

3. Reduce Your Footprint After Cost:

The second driver behind inventory management is space. Having a consigned inventory management system allows you to have all the volume purchasing power you need and make the most of the space in your facility for lean manufacturing.

Working with a manufacturing partner that offers consignment programs with not only the physical space available for your product but also the proper environment (which is extremely important in the electronics space) can help you reduce your manufacturing time and costs. Utilizing your suppliers warehousing and customizing a tailored solution to improve your JIT inventory is a proven process to reducing operations costs.

Summary

Finding a manufacturing partner is more than just selecting the lowest cost option. Sooner or later we all learn the hard way that the saying “you get what you pay for” is all too true. As all of our organizations and supply chains become increasingly complex, finding a supplier that is willing to tailor an inventory management system to your needs will offer advantages across your bottom line.


Topics: Quality Solutions, US Manufacturing


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