This is a part of the 2014 Distribution Trends Report. The annual report was researched and written by MDM editors based on interviews with dozens of wholesaler-distributors, as well as industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this report.
2014 Distribution Trends Report
This article is a part of MDM’s 2014 Distribution Trends Report. The article analyzes the key trends in inventory management in the wholesale distribution industry, including better collaboration between manufacturers and distributors and better use of data in regards to inventory.
In order to stay viable in an increasingly competitive market, manufacturers and distributors are working more closely together to better manage inventory. “We are seeing a lot more attempts at collaborative cooperation in forecasting and planning between suppliers and distributors,” says Jon Schreibfeder of Effective Inventory Management, Inc.
Budgeting, or “wanting to know precisely how much inventory a distributor will have over the upcoming 12 months,” is becoming more important to the partnership, Schreibfeder says, because manufacturers want to manage their investments in distributors.
Distributors also want more information from their vendors. “A lot more people are very interested in vendor evaluation, tracking vendor performance, using vendor performance metrics in negotiations with vendors,” Schreibfeder says. “Also, using these metrics and the results of the evaluation to work with the vendor to improve their performance.”
Demand for inventory management services continues to grow, with nearly half of the respondents (47 percent) to a recent MDM survey indicating an increase this year. “Managing inventory, sourcing and fulfillment are core competencies of distribution,” one respondent wrote. And offering the option can help deepen the relationships within the industry by improving the data that is shared.
“We are working with some of our suppliers on vendor-managed inventory, as well as working with them to share information about our sales to our customers so we can better manage the supply chain and position inventory a little bit better and increase service levels from where they are,” says Don Schalk, president and COO of specialty building materials distributor C.H. Briggs Company, Reading, PA.
Tightly managing inventory is critical in today’s business environment, Schreibfeder says. “We are seeing a lot more emphasis on monitoring and managing firms’ total inventory investment.” To do this, many distributors are moving to centralized distribution centers or using warehousing as a freight-forwarding station rather than a stocking facility, Schreibfeder says.
While centralized distribution centers are on the rise, it’s not the only solution, says Phil Derrow, president and CEO of Ohio Transmission Corp., Columbus, OH. “I see trends going in both directions,” he says. “You see some suppliers really emphasizing central warehouses and having everything, moving away from more tightly managed inventories. And I see other suppliers moving the other direction, and emphasizing logistics, to get product to market, from a variety of sources rather than having it in their own warehouse.”
In either case, distributors are improving their internal inventory processes. “For us, it’s some of our own internal inventory management; putting ourselves into a position that we’re able to do a little bit better job with some forecasting for our own purchasing,” says Don Fritzinger, president of Singer Equities, Glen Burnie, MD.
Distributors are also looking to make smarter inventory decisions through the use of analytics and technology. “We are seeing people really pay attention to the money invested in inventory,” Schreibfeder says. “I am getting more and more requests to present upper-level management with inventory forecasts of value over the upcoming 12 months and even 24 months.”
“It seemed that vendor-managed inventory was kind of a buzzword in the early 2000s,” says Bob Smith, president and CEO of IMARK Group. “Then all of a sudden it just seemed to die off. But now it seems to be back up again. It’s clear that the well-run distributors are really honed in on their inventory management."
