Over the decades of working with our partners to create growth and build our relationship, we’ve discovered that the majority of our partners consistently deal with fat inventory due to working with unreliable vendors.
Idle inventory is dangerous, and the longer you hold onto it, the greater the risk of seeing it sit longer, get damaged or never move at all—each affecting your cash flow.
How Inventory Builds Up
Organizations often carry as much as 40% more inventory than their planned consumption. Companies allow for these additional supplies because they believe keeping this supplemental stock makes sense.
In short, the customer needs to be able to order, and they need to be able to produce and fulfill orders. Unfortunately, there are a number of steps in-between that complicate what would be a simple transaction: unreasonable, unpredictable lead times; over-ordered or inaccurate inventory; damaged inventory; lack of planning; and missed delivery deadlines.
As you work to keep your warehouse stocked with enough inventory to meet demand, a host of delays or missteps can lead to an abundance of inventory. Much of this can be blamed on unreliable vendors. When they miss the tight margin of time and reliability that companies work, it affects the business negatively.
The Cost of Excessive Inventory
Most new relationships with Mainstay begin with organizations that have finally decided that current experience is no longer acceptable. Often, this realization comes from an internal cost-savings strategy that points to not being able to afford the pain and inconsistencies current vendors create.
Excessive inventory is very expensive. Worse, inventory hides in the reports that teams view to measure performance. Inventory isn’t on an income statement until it becomes a cost of goods sold. All of the soft costs excessive inventory add to a production line hide in non-value added labor costs, poorly utilized rent, non-captured overhead burden and inventory write-offs from scrap or disposals.
It can take a while to lean and correct inventory levels to a sustainable degree. But by working with Mainstay, our partners have been able to gain efficiencies of additional value add labor, additional floor space to convert to production, reduction in transactions and communication that come from lack of trust or poor planning and benefits from additional cash flow.
Changing vendors is painful and keeps many from working on the problem instead of within the problem. Mainstay understands the pain of changing vendors and is ready to help reduce the trouble caused by both.
When you find that you are ready for a partner to help you work on the problems unreliable vendors keep you, reach out to Mainstay and let’s discuss your specific challenges in order to help both companies reach new goals.