Welcome back to our supply inefficiency video series. Today, let’s explore the cost of buying direct.

It might seem better to purchase inventory directly from the manufacturer or supplier, but the cost of doing so includes more than just the purchase price.

Depending on how many different suppliers you’d need to work with, costs associated with transportation, procurement and production may add up fast. 

In addition to these costs, if you are buying direct, you may not be entitled to the discounts or quick lead times that are available to a distributor who works more frequently with that supplier.

Imagine if you were able to condense all of your purchases into one. Not only would there be fewer deliveries to deal with and less time spent purchasing and stocking inventory, but everything you need would arrive together. 

Consolidation also means more buying power, which puts you in a better position for negotiation as well as moving you up the priority list, when needed.

In our next episode, we’ll discuss supply inefficiency number four, freight, so come back to Falcon Fastening soon.

Thanks for watching.

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5 Supply Inefficiencies Costing You a Fortune…Continued

Supply Inefficiency Intro
Supply Inefficiency IntroTotal Cost of Ownership
Lowering cost is a top priority, but many manufacturers just shop for the lowest price and completely miss the bigger cost-saving opportunity.
Supply Inefficiency No. 1
Supply Inefficiency No. 1Labor Related Costs
If you are purchasing and warehousing your inventory on-site, you should be aware of labor costs that are significantly contributing to your total cost of ownership, or TCO.
Supply Inefficiency No. 2
Supply Inefficiency No. 2Carry Costs
Inventory carrying cost can be up to about twenty-five percent of the overall value of the inventory, but this can be much higher without proper management.
Supply Inefficiency No. 3
Supply Inefficiency No. 3Buying Direct
It might seem better to purchase inventory directly from the manufacturer or supplier, but the cost of doing so includes more than just the purchase price.
Supply Inefficiency No. 4
Supply Inefficiency No. 4Freight Costs
If you are buying inventory direct, freight charges can quickly eat away at any cost savings benefit you initially believed you would realize, especially if you are using multiple suppliers.
Supply Inefficiency No. 5
Supply Inefficiency No. 5Error-Related Costs
When things don’t go as planned, course-correcting can be an expensive and painful process. Error-related costs, such as downtime, can make or break a production budget.
Supply Inefficiency & The VMI Solution
Supply Inefficiency & The VMI SolutionReduce Costs with VMI
Now, let’s look at how a vendor managed inventory, or VMI, solution addresses these five supply inefficiencies.