You need a change. What you’re doing isn’t working. Things aren’t getting better and you’re more stressed than ever. You want an idea that will give you more of what you need. Time.
But the real issue is what you’re going to do about it? A vendor managed inventory is a solution that will resolve a lot of your time and cost problems. And, it’s easy to implement. But first, let’s understand some of the issues it’ll help you resolve.
You spend a ton of time processing orders
Every time you cut a PO you spend between $50 - $200 just to process the PO. Just think. How many POs do you cut a week? 10, 15, 200?
If it’s 200 you’re spending $20,000 a week processing POs. Yikes!
I’m not sure what’s worse than that, but if you’re cutting 200 POs then you’re also sending out a ton of RFQs. After you source, chase, and process, your purchasing team’s time has been dried up. There’s no room for flexibility.
A vendor managed inventory solution will dramatically cut your sourcing and processing costs.
Your supply chain is difficult to navigate
Have you purchased 10 aircraft parts from 10 different companies? Are you often confused on how to process a list of 150 expendables and consumables?
With millions of components and unlimited options of suppliers, sourcing, processing, and tracking orders is time consuming. The goal for any procurement operation is to efficiently procure material from the right source and to get it at the right time.
If the procurement team is blindly ordering, operating costs will rise.
Your inventory is robbing cash
Inventory is a huge cash burden. Most airlines spend 20% in holding costs per year. Why not use that cash to fund your core activities instead?
When you tie up cash in inventory you’re making a choice. An opportunity cost. Could this money have generated more money invested elsewhere in your operation? On your core activities?
With a vendor managed inventory you’ll only have what you need for near term demands. As you consume this material your trusted advisor will automatically send replacement inventory. All you have to do is take receipt of these goods and begin consuming.
There’s no more reason to stock material you won’t use or to stock anything at all without a trusted advisor’s support. Reduce your inventory burden and let a VMI solution do the heavy lifting for your expendables and consumables.
You’re purchasing the same items
Do you purchase the same aircraft material regularly? With processing and shipping being a real cost, it makes sense to automate this process. This goes for both rotables and expendables. You know you have a need, you know what part you need--so automate it.
With a vendor managed inventory solution as you consume material your trusted material advisor will be alerted and they’ll send you replenishment stock.
You need better reliability
Your supplier database is huge. You go to the best price. But with this procurement mentality comes unreliability. You’re stuck having to chase orders, get people on the phone, and get timely replies to your requests. Often, it seems impossible.
How can you get a fair price with total support?
With a VMI solution you’ll get a Dedicated Account Management (DAM) team. You’ll know exactly what and when you’ll get certain material. There’s no need to chase or expedite orders. It’s all taken care of for you.
Are you having to resolve PO issues?
When vendors cancel orders you have to pick up the pieces. You have to find solutions and organize contingency plans. Even when you can find a solution, it’s frustrating.
With a vendor managed inventory solution, there’s no canceling. There’s nothing to worry about. The material comes in as you need it.
You become AOG for high consumption items
Becoming AOG for an expendable or consumables is frustrating. We just saw a customer spend $12,000 to deliver 20 bolts. Crazy! Necessary, but crazy.
In these situations your VMI solution will come with a predetermined forecast based on your annual consumption habits. It also builds in pre-determined safety stock for these “just-in-case” moments.
You spend a lot of money on freight
Take a look at your freight costs. How much are you spending compared to your purchase price? 5, 10, 15%?
With an international purchasing operation, the cost adds up. Especially if you’re not following a $ave by Consolidating purchasing principle.
With a VMI solution, you’re replenishment inventory is consolidated and shipped…even with other orders that fall outside of the VMI. This saves money on freight. It also reduces your need to express ship small parcel or AOG ship urgent expendables.
The freight savings is a big advantage.
You need predictable inventory
Do you purchase material to cover what you “think" you need? This is a huge waste of capital and gives you no data on consumption patterns. This is anything but predictable.
With a VMI solution, a forecast is modeled and revised over time. You’ll see what you’re consuming and when. You’ll see what items need more coverage and what items need less. You’ll have an up to date inventory cost and you’ll also be able to see what you’ll be needing in the near future for replenishment. You’ll see exactly what you need and the money tied to it.
Your point of contact are robots or inhuman
This is a controversial one. There’s nothing more frustrating, from a procurement standpoint, than having to dial an 800 number and speak to someone you’ve never talked with before. Where's the trust in that? Especially when you’re AOG. Relationships are built on trust and no website or 800 number can deliver on the human side of our procurement world.
With a VMI solution you’ll get a 24/7 Dedicated Account Manager. She’s your go to resource for anything you need. There’s also a dedicated team behind her to manage your forecast, ensure material meets your replenishment timeline and help with any issues that may arise.
A VMI solution will resolve many of your procurement issues. The first step is to look at this list and really see what issues you deal with. Which ones resonate with you? The next step is to discus this with a trusted material advisor and begin resolving them with a VMI solution.
Do you experience any of these issues? Which ones? Explain below.