Stocking And Warehousing: Purchasing For a Volatile Manufacturing Production Pace
By Mary Iannuzzi on August 27, 2019
Buying for a manufacturing company with an unpredictable production pace is a difficult – if not impossible – job to do perfectly. Changes in demand can be sudden and unexpected, leaving you with a burdensome surplus or lack of parts. Effective collaboration between sales and procurement can help remedy the situation to some extent. A better solution is to take advantage of stocking and warehousing programs. This post details four advantages of such programs.
1. On-Demand Release
If you are used to placing full orders with a supplier and waiting for the whole batch to arrive, this is a game changer. One of the biggest advantages of warehousing parts is having them ready when you need them. Even if you are a Type-A planner, you may not have much control over changes in production schedules. However, if you’re parts are stocked in a warehouse, you can have them at your door in a matter of days. Most services will offer same-day release and shipping with a quick email or phone call.
2. Larger Order Quantities = Bargaining Power
Having warehousing available off-site is a great way for small companies to increase their bargaining power. It’s difficult to match prices with a larger competitor because of their ability to buy in bulk. In general, the more parts you’re able to buy, the more you save on each part. If the warehouse is owned by your supplier, you usually don’t have to pay until you release your parts, which would help with cash flow. Warehousing with a third party allows you to place large orders with a supplier without keeping all of that inventory in-house.
3. Back-Up Stock
In addition to saving money, having a large order stocked in a warehouse is a safety net. In the event that your company receives a huge order and suddenly needs twice as many parts, you are covered. If your warehousing partner offers Kanban services, they should have two full releases in stock at all times. You may just pay as you go and never worry about running out of stock.
4. Low-Risk Growth
When the money saved from outsourcing turns into more revenue and higher profit margins, growth will follow. If you have an established stocking program with a supplier, there’s ample space for this growth. A good supplier can be like a partner or an extension of a company. The company may then focus on investing on increasing production rather than worrying about expanding their own warehouse space.
Michigan Manufacturing International partners with American companies to source custom mechanical components and assemblies. Warehousing and inventory management programs such as Just-In-Time and Kanban are a standard benefit of sourcing with us and offered at no extra charge. Our supply managers live and work in five low-cost regions, maintaining decade-long partnerships and ensuring quality before parts leave the supplier. Our business model offers a single partner solution to sourcing abroad, providing the cost savings of purchasing internationally with the ease of buying from an American supplier.