Stocking programs have long been used to reduce operating costs, lead times and furnace down time. However, there are many manufacturing companies that have yet to take advantage of these programs. If your company is looking for ways to save money and improve profitability, here’s what you need to know about stocking programs.
What’s holding you back?
There are typically several reasons why a manufacturing company hasn’t implemented a stocking program:
Hesitation: There is a fear of the unknown and companies get comfortable doing what they’ve always done.
Financial commitment: Many assume that a stocking program involves a significant financial output in order to be successful.
In reality, there are many benefits and several different types that can ease the up-front financial burden, while mitigating the risk exposure of slow moving inventory. This makes it a win-win for both you and your supplier.
The benefits of a stocking program
In the commercial heat treating industry, fabricated parts such as muffles, rotary retorts, inner covers and radiant tubes can have a lead time of anywhere from eight to 15 weeks and in the case of more expensive alloys, even longer. Prematurely pulling a muffle or a radiant tube out of service for any reason causes disruption and lost revenue for your company. This is where stocking programs can provide tremendous benefits.
Here are three benefits you should consider:
- Reduce your exposure and risk: Your customers rely on your heat treating capabilities. Downtime – especially unplanned downtime – results in production delays and could place your company at risk of losing revenue, profit and more importantly customer confidence.
- Increase your profitability: When you know that furnace parts can be delivered in as little as three days (depending on the type of stocking program) you can breathe easier knowing your furnace will be up-and-running as soon as possible.
- Reduce inventory levels and cost: Depending on the program you choose and the parts your furnace requires, you can save on both inventory and cost. The supplier can hold on to excess inventory until it’s needed, or work on fabricating what you need during slower times of the year.
Find the right program for you
Stocking programs aren’t one size fits all. There are several types to consider, and we suggest working with your vendors and suppliers to develop a program that meets your specific needs.
Here are three types of stocking programs you might consider:
- Build and hold model: When you know what you plan to re-order but aren’t sure when you’ll need the replacement; this option works within a six to 12-month window for re-ordering.
- Consumption based replenishment: As the name indicates, new parts are put into production as you consume what’s waiting on the shelf. With pre-agreed pull quantities, your risk of slow moving inventory is reduced to a fraction of more traditional blanket order programs.
- Kanban or Just-In-Time: This involves only what is needed, when it is needed, and in the amount needed – and helps protect inventory risk.
As you can see, there are different approaches to stocking programs that can be customized to the needs of your heat treating operation.
Alloy Engineering offers stocking programs tailored to meet each customer’s needs. To learn more, contact us here or call us at 440.243.6800.