- Understanding Customers Key To Inventory Control
- Prioritizing Safety Stock And Other Inventory
Embrace Buying Groups, ERP Software
Just as forming a good relationship with the customer helps distributors to provide better service, having great communication with the manufacturer can also pay great dividends. In fact, Attman suggests the distributor-manufacturer relationship is one of the most vital aspects of quality inventory control. For starters, a strong dialogue between the two sides better ensures the fast-moving, high-selling products are never out of stock.
And just like with the customer, the A to E item conversation must be had with manufacturers, too. This is because there’s a difference in what letter grade each side assigns a product, and what priority that grade gets in terms of service.
For example, manufacturers might only strive to deliver what they deem to be a “D” item to the distributor at a 70 percent fill rate. So if a distributor’s “A” item is the manufacturer’s “D” item, the distributor is going to want to keep an eye on that product the best they can, says Attman.
All of this — keeping a good dialogue with both the manufacturer and customer — gives the customer a better idea of how much it should request in an order and when to place the order.
“My recommendation is to understand your customers’ ordering volumes, and in conjunction with knowing your manufacturers’ lead times, you can then develop what quantities are needed,” says Attman.
Tools For Success
Trusted business relationships are a fantastic asset, but distributors don’t have to rely completely on the actions of others. Luckily software, buying groups and wholesalers are also assets distributors can lean on in their quest to balance how much product they keep in stock.
For best results, distributors should definitely be using a distribution software package or enterprise resource planning software. There are plenty of software packages out there and some work best in different situations or for different companies. Schreibfeder says Effective Inventory Management recommends that their clients use various software packages. Acme Paper and Supply has been using the same software for 20 years and continues to find new ways to maximize what it can do for the company and its planning, says Attman.
If a company takes the time to truly understand its software package and adjusts its replenishment functionality settings to meet its specific needs, the software is going to do the heavy lifting and will ensure inventory is balanced correctly, says Bader.
“Generally speaking, most software programs give the user options on how he or she wants to purchase. (The distributor) needs to understand which ordering controls affect timing and which controls affect quantity,” says Bader. “Timing (when to place the order) is affected by estimated usage, lead time and safety stock level. Quantity is usually affected by factors such as carrying cost, unit cost, historical usage, minimum order quantities, etc.”
Becoming a member of a buying group or using wholesalers every so often can also reduce risk for jan/san distributors and is a good option if participation in one of the two improves profitability.
Bader likes wholesalers because they allow the distributor to purchase in smaller quantities than they would from the manufacturer, thus reducing the risk of not selling the inventory fast enough.
“(It’s) honestly the best way to improve turns without jeopardizing service,” says Bader.
Acme Paper and Supply has belonged to a buying group for a while now and Attman says the move is “hands down one of the best things” the company has done. He enjoys the fact that buying groups allow distributors to work with non-competing companies from across the country. Since each of these jan/san distributors doesn’t have to worry about the other stealing business, they’re all able to help each other by sharing tips and solutions for common issues.
It’s clear there is no “easy button” or “magic pill” that ensures distributors great success when it comes to inventory replenishment. However, jan/san distributors can put themselves in a more favorable position if they maintain strong working relationships with other members of the supply chain and both use and consistently monitor software tools that make it easier to determine when an order should be placed
Prioritizing Safety Stock And Other Inventory