Reducing Lead Times

Why should you focus on your business' lead times? It's important to ask yourself this question, especially if your business is serious about getting things done. When it comes to your supply chain, reducing lead times is essential if you want real performance for your business. If you want to increase efficiency in your business and focus on long-term growth strategies keep reading below.

Lead Time Factors

Many things can hurt your company's lead times. For example, if you are outsourcing products from overseas, these often have an extended shipping time, this could play a significant factor in your supply chain's performance. This may seem like a good alternative, but it could be costing you more money in the long run. Are you factoring this time into your sales, production and other important metrics? Shipping delays can often turn into months instead of weeks, causing slowdowns in production and ultimately hurting your bottom line.

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For many companies, a Vendor Managed Inventory program is a better way to handle replenishment.

The natural question for you to ask now is … why? What are the benefits of having a supplier manage MY inventory?  In a word … MONEY.

Now that’s obviously an oversimplification. But when you break it down and look at all the different parts of the replenishment cycle a VMI program can impact, it becomes easy to see the benefits.  

Let’s take a more detailed look.

There are a number of options, and plenty of decisions to make for companies considering a Vendor Managed Inventory (VMI) program. Depending on a company’s goals, budget, and available resources they’ll have to decide on the type of VMI program, to what extent the VMI provider’s personnel will be used, how products in your program are going to be replenished and accessed, and more.

We’ll look at a few of these options in this post.

There are essentially two types of VMI programs

• Non-Consignment
• Consignment.

Both Non-Consigned and Consigned VMI programs offer customers a similar list of benefits, which you can read more about HERE.

For many companies, a Vendor Managed Inventory program represents a better replenishment strategy.

Vendor Managed Inventory (VMI) is exactly what the name suggests. A program in which one of your vendors acts as a partner who takes on the day-to-day tasks and responsibility of managing your inventory.

For manufacturers, a VMI partner is usually a key supplier of component items, such as hardware, fasteners, or MRO products. Products for which it’s critical to strike the right balance between having enough to eliminate “line-down” situations, but not so much as to incur high carrying costs or run the risk expiration or obsolescence. The ideal VMI partner has the capacity to provide the majority of those parts which allows you to take greater advantage of the benefits of Vendor Consolidation.The VMI service provider works alongside you to implement a strategy based on your inventory management needs. They become an extension of you and your replenishment team, not a replacement.

Are you a manufacturing company? If so, does your business depend on inventory to get by? If you answered yes to one or both questions you might be familiar with a two-bin system. A widely used inventory management system, a two-bin system basically deals with two bins to help you or your team keep track of inventory. It helps you determine when inventory is full, low, and needs replenishing. A two bin system often exists in production lines where multiple parts come together to create a new product.

If you’re considering vendor consolidation, you should consider that it is one of the easiest ways to control your supply chain. You are basically drastically reducing the number of vendors you deal with, therefore simplifying your business.

Let’s face it, there are a lot of things that need to get done, and only so many hours in the day to accomplish your tasks. When it comes to dealing with vendors, how do you manage this?

Why Do You Need Inventory Management Software?

Inventory management is a crucial part of your business and having a solid system in place to help you run business is as important as your inventory. If your business depends on inventory you need to be sure that you are running things smoothly. This means preparing for the future, having the correct levels of inventory, monitoring your supply chain and more. If you’re still doing things the old-fashioned way, it might be time to ask yourself: Why? Why deal with uncertainties, unnecessary business challenges, and headaches that ultimately cost you money when there is an easy solution for your business. If you’re using out of date systems like spreadsheets, two-bin systems, and anything else leaving room for error, it’s time to consider new methods for growing your business.

There are two types of VMI program – Non-Consigned and Consigned.

Both Non-Consigned and Consigned VMI programs offer customers a similar list of benefits, which you can read more about HERE.

In a Consigned VMI program, the inventory is put in place, but the customer doesn’t pay for it until it’s consumed. You can learn more about a Consigned program HERE.* 

* It should be noted that the benefits of Consigned expressed here are relative to Consigned VMI, not simply Consigned inventory. One can have Consigned inventory absent a VMI program.

The more traditional of the two programs is Non-Consigned VMI. In a Non-Consigned program, the customer pays for the inventory as it’s brought in, and whenever replenishment is necessary.

What is Production Inventory?

If your business produces a finished good, then you may be familiar with the concept of production inventory. Simply put, production inventory is the amount of goods you have on hand to complete the manufacturing process. It’s all the parts and supplies your business needs to make your product. Production inventory is important to the manufacturing process and therefore important for your business.