Carrying Costs of Inventory (What It Is & How to Calculate It)
Gaining a deeper understanding of your carrying costs of inventory can increase profits overall, but the task is easier said ...Read Post
When it comes to inventory, less is not always more.
A centuries-old proverb admonishes that “For want of a nail, a shoe was lost...” and the truth behind that holds today. If your customer is missing even a small, inexpensive part, the whole project can shut down, for a few hours or a few days. And that can be costly in ways that go beyond the potential loss of thousands of dollars.
For fear of these consequences, some distributors turn to the other extreme: overstocking their customers, also known as bin-stuffing.
But overstocking can breed mistrust between a distributor and its customer. Rather than view it as a way to keep stock from running low at critical times, customers will assume their distributors are just trying to make more money off of them. (And – let’s be honest – some distributors do use bin-stuffing as an opportunity to meet end-of-year quotas.)
But inventory tracking and automated replenishment systems like eTurns’s TrackStock can ensure distributors’ customers won’t run out of stock or incur the cost of excess inventory. That’s the sign of a good partnership.
With eTurns TrackStock, inventory managers use an app – they don’t have to be at their desk or connected to wifi – to track and update inventory in real time. With a single scan, a distributor rep can input a product’s item number, location, quantity and customer. And these orders can be placed through the cloud directly to an ERP system.
Customers who’ve fully implemented eTurns TrackStock report inventory levels lowered by as much as 73 percent. And they report enjoying the ongoing savings that comes in the form of 73 percent reduced carrying costs as well as a dramatic reduction in time spent with spreadsheets.
We’ve encountered some distributors who fear that by automating inventory, they’ll be losing control. In fact, the opposite is true: Automated inventory replenishment isn’t about giving up control to technology, it’s a means to gain better, more complete control.
A Gexpro Services customer said that before it implemented eTurns with the distributor, “there was no oversight. We weren’t able to take snapshots of where we were at any given moment. In the end, we had a lot of excess material.” That excess material carries a lot of cost.
Excess inventory restricts distributors’ and their customers’ ability to invest in other areas. When that excess is too great, it can even make doing business difficult. It can zap profitability through higher warehouse, insurance and labor costs.
There’s even the risk that demand will change, leaving you and the customer with product nobody wants.
eTurns allows distributors and their customers to monitor inventory levels at any time of the day, providing visibility, transparency and control. In turn, trust between distributor and customer grows as the customer appreciates having optimized inventory levels. Distributors tell us that eTurns TrackStock has helped them increase wallet share by up to 30 percent because customers appreciate the cost savings and ease of use that come with replenishing through eTurns. Automated inventory replenishment can get you off the high wire of balancing inventory levels for your customers and back on solid footing.
--Rock Rockwell, CEO