Guest Post: How Distributors Can Meet Consigned Inventory Cost-Reduction Targets
With the volatile supply chains sparked by COVID-19, many distributors were forced to thoroughly analyze inventory levels and reduce expenses ...Read Post
What if you as a distributor could give your customers a min/max inventory management tool to tell them exactly how much cash they could remove from inventory based on that customer’s actual usage? This isn’t something ERP software can tell you because it doesn’t track on-hand quantities in customer stockrooms or service trucks. Neither does it track actual usage at the customers’ point-of-use.
eTurns TrackStock Automated Replenishment Apps increase inventory visibility, optimize inventory and lower procurement costs. To do this, they track on-hand quantities and usage at the customer’s point-of-use, giving the distributor and their customer valuable data that they can use to know just how much inventory that customer needs on their shelves, and no more. Once the customer has used eTurns for at least 45 days to replenish their inventory, eTurns has enough data to calculate what optimum minimum and maximum settings should be.
The eTurns Min/Max Dashboard displays the following data that customers can use to optimize their inventory levels:
1) the optimum settings for each item
2) the resulting inventory value
3) how much cash can be saved
4) the current supply level of each item
By adjusting the slider bar on the dashboard, customers can learn the cash savings that would come from moving their current stock levels closer and closer to the calculated optimum amount of inventory.
Obviously, the one-time cash savings that come from optimizing and reducing the inventory level of each item is fantastic. But the savings don’t end there, because there are annual cash savings that come with carrying less inventory.
Inventory carrying costs include the costs of storing inventory in a warehouse and things like rent, utilities and warehouse employee salaries. It can also refer to costs such as insurance, perishability, or shrinkage. Essentially, carrying costs involve the costs you or your customers pay to keep inventory on hand.
Inventory carrying costs typically run between 25-55% of the inventory value, so the annual cash savings from lowering those costs ends up more than covering the cost of the eTurns TrackStock software. Improve cash flow, reduce forecast errors and improve demand planning without watching money waste away on stockroom shelves.
Distributors often hesitate to offer consignment because of the perception it is too expensive, tying up cash in inventory at customer locations and increasing risk. But, combined with best practices, the eTurns TrackStock’s Min/Max Tuning Dashboard can make it much less expensive for a distributor to provide consigned inventory management to their customers.
Distributors who use eTurns have told us that the Min/Max Dashboard often lets them know they are stocking 3 times more inventory than they need in the customers' stockrooms.
If the distributor can remove two-thirds of the inventory at one of their consigned customers (since eTurns helps them optimize all items), they can redeploy that investment to two other customers who deserve consignment. Therefore, for the same investment, the distributor can triple his customer coverage for consignment.
Distributors who offer eTurns to their customers as a value-added service for replenishing and optimizing stockroom and truck inventory increase same-customer revenue by around 30%. Other benefits include:
When distributors provide customers with the value-added service of automated replenishment through the eTurns TrackStock Replenish or TrackStock Manage apps, they give them the powerful Min/Max Tuning Dashboard tool that uses a customer’s actual demand data. That data optimizes their inventory and saves them cash, not only in the first year, but on an ongoing basis. There is nothing that builds loyalty like saving a customer money.
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