Now that the economy is again growing, manufacturing companies are starting to see longer lead-times and higher minimums with the fastener manufacturers from whom they have been purchasing. Buyers face the challenges of needing product in a timely manner, a reduced amount of available storage space in the plant, and goals to reduce the investment in on-hand inventory.
Standard lead-time on this fastener is now 1 week from the distributor compared to 10-14 weeks from the manufacturer.
To address this issue, they worked with a distributor who could take over the purchasing, stocking, and delivery of the product, as needed. They went from a high of 12 pallets of material in the plant to a maximum of 2 pallets. One pallet is on the floor for work-in-process and the other pallet is for moving to the floor, when needed. (When this occurs the distributor delivers one pallet).
Standard lead-time on this fastener is now 1 week from the distributor compared to 10-14 weeks from the manufacturer. Plus, they can have next morning delivery, if needed, to meet a change in their production rate.
Of course, the next logical question is; “Do they now pay a higher piece price?” The answer would be yes since the services are factored into the cost. But for them, their overall cost is lower (considering the buyer’s time, the dollar investment in extra inventory and the value of the space they gained).
This is not an isolated situation, as we are receiving more and more contact from manufacturing companies facing similar situations.
What is right for your company? One good way to find out for sure is to compare both options, factoring in all costs (including the piece price), and then go with the solution that is best for your company. Part of your consideration should be your distributor’s capabilities. They need to be skilled in this type of business model.