VENDOR MANAGED INVENTORY
Using our VMI system will help you optimize your supply chain. We will maintain your inventory levels both onsite and at our warehouses and will be responsible for generating new purchase orders, manufacturing builds and deliveries on your behalf.
Partnering with Franklin August for inventory management makes sense for so many businesses. Our VMI program allows you to free up valuable space for maximum production and manufacturing, to better manage cash flow by reducing inventory costs and eliminating the lion share of administrative tasks.
B E N E F I T S
Appropriate inventory levels that allow you to meet your needs
Reduced space allocated to inventory
Reduce instances of stock out situations
Allow for rapid response and replenishment when spikes hit
Decreased planning and ordering costs as we will manage these activities
Real-time collaboration on a to ensure your goals are met
Reduced inventory obsolescence
THE TRUE COST OF INVENTORY
Direct investment costs
These costs include insurance for the inventory, shrinkage and pilferage costs, obsolescence losses, and the fundamental cost of capital.
Holding the inventory
Physically keeping inventory comes with several costs such as building rent or depreciation, heat and utilities, and janitorial and security costs to clean and protect the building and its contents. Companies should also consider taxes and the cost of capital for the land.
Handling the inventory
Once the inventory is in place, there are costs that come with it being moved, such as handling equipment, employee costs, and freight and transportation. Consider the forklifts, pallet trucks, and vehicles that must be used to move inventory from A to B.
DETERMINING THE RIGHT AMOUNT OF INVENTORY
Past usage is a way to determine how much inventory is needed in a year, but it isn’t foolproof. You also need to examine upcoming sales or marketing initiatives and how they will drive demand. And too forecast for key components (like packaging), you need review at the SKU level, which takes time and diligence. Knowing overall demand helps you determine a yearly buy, but not the amount to carry at any given time.
If you can order frequently, then you require less carried inventory because you can do replenishments often. But placing more frequent orders may reduce your purchasing scale, with higher per-piece pricing and freight costs. The other side is not being able to order frequently, which means you need a greater inventory level on hand to satisfy demand.
If you’re lucky and can order an item one day and receive it the next, then you don’t much need to worry about lead times. However, this isn’t always the way ordering works, and lead times can vary due to supplier issues, the type of product, and the location of suppliers. You need precise planning to handle longer lead times, which leads some firms to hold more inventory as a hedge.
When you have uncertainty in the supply chain, you need to carry extra inventory as a safety net. If you can’t manufacture or fill product due to components being out of stock, then you risk brand failure and lost profits. You need to align safety stock levels with supply-chain uncertainty to act as an insurance policy against unforeseen issues or mistakes in your own inventory management.