Say you’ve just won the lottery and you’re ready to plunk down some of that hard earned money on your dream car - let’s just use a Ferrari California as an example –- and you want a specific color – the dark red Rosso Mugello. You head on over to your local dealer and find that he doesn’t have it on his lot. However, that’s not going to stop the dealer from relieving you of a portion of your new found wealth; he can quickly and easily find exactly what you’re looking for by searching the database of all available cars at Ferrari dealers across the country.
Car dealers can do that. How can independently owned wholesaler-distributors emulate that system for their inventory needs? By utilizing Inventory-Sharing.
What is Inventory-Sharing?
“Inventory-Sharing” is formal collaboration of a manufacturer and its franchised wholesaler-distributors. Separate collections of inventory are virtually combined, increasing channel efficiency. Demand by one party is fulfilled by available inventory owned by another party. Inventory-sharing is more than dumping dead inventory or living off others’ inventory investment - it is true synergy between peer wholesaler-distributors. For many independent wholesaler distributors, inventory-sharing can be a game-changer.
Inventory-sharing benefits manufacturers, wholesaler-distributors and end-customers.
Benefits for a manufacturer:
- Improved brand reputation because of better product availability throughout the distribution channel
- Increased manufacturing efficiency due to fewer small quantity manufacturing runs and expedited delivery crises
- Reduction in unwanted inventory in the distribution channel, reducing the pressure to take it back and improving the financial health of the distribution channel
Benefits for a distributor:
- Fewer lost orders and backorders, increasing revenue and decreasing open order management time and costs
- Outlet for slow moving inventory for improved asset recovery and financial health
- Opportunity for incremental revenue from sales to like-franchised distributors
Benefits for customers:
- Improved product availability from a local source, reducing PO fulfillment delays and open PO management costs
WarehouseTWO Expands Beyond Original Scope
Since the creation of WarehouseTWO for its target group, other manufacturers and their communities of like-franchised distributors have discovered this easy-to-deploy tool. Integra Companies, Inc. of Devens, MA is a distributor of high purity and sanitary fluid-handling products. While there are only six members within the franchise sales channel Integra Companies participates in, these six hold 80% of the available inventory. Obviously, an inventory-sharing tool is of great benefit to these distributors.
WarehouseTWO is so easy to utilize, Integra was able to do the inventory upload from the TrulinX system on their own. Instrument Associates, Inc., a distributor of instrumentation, filtration, hose, piping, and industrial products also utilizes WarehouseTWO to expand its inventory capabilities.
Keys to Successful Inventory-Sharing
Successful inventory-sharing depends on getting to “critical mass” within a community of peer wholesaler-distributors. Factors that influence getting to “critical mass” include:
- Commitment by you to build your community to “critical mass” (i.e., active participation by multiple peer distributors within a franchise, buying group or trade association community)
- Active involvement by the manufacturer, or buying group, or trade association
- Inventory posted by at least five peer distributors; the more, the better
- Automated inventory postings; the more current the data is, the better
- Change in behavior among participants’ customer service / inside sales people; they must view backorders as something to fill quickly, by searching for available inventory among participating peer distributors
- Change in behavior among participants’ purchasing / inventory control people; use of WarehouseTWO’s “BARGAIN HUNT” feature to purchase stock items at distress sale prices
- Inventory-sharing as a standing topic at distributor advisory council meetings
- Expansion of inventory-sharing activity to multiple product lines and peer distributor communities
Is Inventory Sharing Right for You?
Not sure if inventory-sharing is viable for your company? WarehouseTWO has come up with a list of “eligibility factors” for you to consider. The more that apply to your business, the more you can gain from formalized inventory-sharing. Click Here for a handy list of eligibility factors.
Think outside your box!
Mark Tomalonis is the President of WarehouseTWO. For more information on WarehouseTWO and successful inventory-sharing contact him at:
PO Box 1567
Palo Alto, CA 94302