How Manufacturers Use Consigned Inventory to Strengthen Ties to Distributors
Typically, when you think about consignment, you think of distributors offering the service to manufacturers so they can save cash and annual carrying costs because they don't pay for material until they use it.
But as more manufacturers acquire smaller competitors and look to expand distribution, they are flipping the script, leveraging consigned inventory strategies with the eTurns TrackStock automated replenishment app to make it more attractive for distributors to integrate new lines and not pay for them until they are sold.
What are the benefits to manufacturers of providing consigned inventory to distributors?
1) It motivates distributors to carry stock risk-free they normally wouldn’t purchase upfront.
Because it’s consigned inventory, the distributor does not incur a charge for the stock until it’s sold.
Whether manufacturers are replacing a line of products with another or have a new product they want the distributor to embrace, it may be difficult to get shelf space in the distribution center. They might also want to introduce a more expensive product line into that channel.
Another instance where this approach works is when larger manufacturers acquire smaller competitors with similar or competitive lines. Manufacturers give the distributors a discount on the acquired lines, lower than the competing products they may already carry for a limited time.
eTurns helps manufacturers track this inventory in real time, monitoring how it performs without relying on monthly distributor reports.
2) It provides visibility and access to end customers.
There are times when manufacturers may have trouble finding a distributor in a region for their product. If a new customer reaches out directly or a manufacturer wants to enter a new market, a manufacturer must determine which distributor qualifies for the business and can deliver in a timely fashion. In either case, the manufacturer can use consignment to establish a relationship with a distributor if they are not in their network.
Benefits of eTurns TrackStock App for Manufacturers
eTurns TrackStock can be used to implement consigned inventory at distributors’ stocking locations. With this app, if the distributor simply wants the manufacturer to make sure the consigned items are properly stocked, the sales reps and delivery drivers no longer have to write parts down or log into a website, or wait on monthly reports from distributors. Instead, the manufacturer rep or the distributor’s team onsite just scans a barcode to order and hits “submit.”
Alternatively, the distributor will use TrackStock to track consumption as material is sent to its customers. When the on-hand quantity falls below a minimum stocking level, TrackStock automatically sends a replenishment order to the manufacturer.
- See what is moving quickly and what is not.
- Control how much inventory a dealer or distributor has in stock. This is helpful when some distributors are moving more product than others, and can reduce carrying costs at the distributor location for unsold inventory.
- Monitor when inventory falls below a set minimum level, with automatic replenishment orders sent directly to a manufacturer’s system.
- Access end-user usage data directly.
- Speed up order-to-cash cycle between the distributor and the manufacturer.
- More easily determine whether distributor warrants a discount on purchases based on volume.
- Gain a better understanding of usage to drive potential stocking of ancillary products.
In a time of rapid consolidation and tight profit margins, using a solution like eTurns TrackStock allows manufacturers to displace competitive product lines, have greater visibility into distributor and end-customer relationships, and smoothly implement product line replacements.