During the peak of the COVID-19 crisis, we saw how broken supply chains are, due in large part to global sourcing. This has led to long lead times and little control.
When a just-in-time system works, it works. But when demand spikes, as it did for PPE, many companies were unable to scale up quickly, leading to shortages in critical high-demand supplies like masks and hand sanitizer. The most obvious example of this was when healthcare facilities and medical clinics experienced shortages of testing kits and even ventilators when they were needed most. Often because product was made in Asia, which had shut down.
An Institute for Supply Management (ISM) report in late March showed that lead times for inputs at the time were at least twice as long compared with “normal” for Asian, European and domestic sources.
The challenges we’ve seen in the supply chain are deep and complex, highlighting the need to rethink entire approaches for some of the largest organizations.
But distributors have an opportunity to provide some relief locally in the form of inventory management services.
Many distributors offer vendor managed inventory (VMI), where a rep regularly visits a customer to see how much inventory needs to be stored there and to make sure the bins are full enough not to run out until next time. That kind of service is still needed, even when customers are holding you at arms’ length. Many customers want to limit the number of their own people required to manage inventory in-house, and they are still keeping supplier reps out as much as possible to limit exposure.
So, here are a couple of solutions to providing these critical inventory management services that reduce supply volatility and increase much-needed visibility – without the touch.
Move from Vendor Managed Inventory to Customer Managed Inventory
Given today’s social distancing requirements, a customer managed inventory program supported by the right technology is a better way to replenish inventory for critical or frequently used items.
Give the customer an app on a mobile device. When they decide they need more of an item, they simply scan a barcode. The package quantity automatically comes up on the device. They tap, submit and go back to work. After an order is placed, the distributor makes the delivery, touch-free.
Apps can even record the item location at the time of scanning, which helps the put-away process. This kind of customer managed inventory (CMI) technology is far faster, eliminates price shopping and reduces the risk of error.
The only difference between CMI and VMI is whose hand the scanner is in. The customers know what they want, when they want it and how much they want. Because replenishment is driven by usage, it reduces the amount of inventory in their stockrooms. That means less cash tied up for the customer and the distributor.
For some customers, CMI will stick as the long-term play. Reps probably won’t be as welcome as they once were, and today’s technology allows distributors to monitor inventory counts from afar and visit only when they need to do so. And when they do, they can focus on providing more strategic value-added solutions.
Embrace Sensor-Based Inventory Management
Another way that distributors are increasing their stickiness with customers, even when they can’t visit as often, is to use sensors for inventory management, removing the need for humans to monitor inventory levels at all.
The Internet of Things has come of age in recent years. You are probably using it to some degree in your home through the use of smart thermostats and security systems. Many manufacturers use it for preventive maintenance to identify potential failures before they happen.
In the case of inventory management, a sensor-based solution puts an IoT weight sensor under a bin of material on a stationary rack or mobile rack. That sensor monitors on-hand quantity at user-defined intervals. If the weight falls below a minimum, a replenishment order up to the maximum is sent to a distributor’s ERP system. Nobody has to visit the location to evaluate whether inventory is required. The required supplies are shipped, and the customer takes care of the restocking.
Many distributors are struggling to deliver their value at a time when their business model has been severely disrupted. Embrace technology to upgrade how you deliver one of the most common services distributors offer, and you’ll continue to drive efficiencies and prevent stockouts — all despite social distancing.
Rock Rockwell is CEO of eTurns, an automated inventory replenishment app for distributors and their customers that uses phones, IoT sensors and RFID to optimize point-of-use replenishment in stockrooms and service trucks. Reach him at firstname.lastname@example.org.