Why businesses choose customer managed inventory

Customer managed inventory is a way for you to get your inventory in the hands of your customers without you having to physically manage it yourself. It’s less work for you than traditional vendor managed inventory while still offering rapid replenishment for your products. More and more, this is a service add on being seen and used by more and more industrial and manufacturing based businesses. It has also been seen to be highly effective too in keeping up with supply and demand in the supply chain overall.

What you should know about this type of supply offering:

• Customer managed inventory lets customers scan their own inventory and transmit that data to your systems.
• Customer managed inventory is much like vendor managed inventory, except customers do the scanning.
• With customer managed inventory, customers have more control over their ordering while enabling faster, more accurate replenishment.

How it works for the end user

With customer managed inventory (CMI), you place your inventory in your customers’ warehouses and let them handle the inventory management. They scan or otherwise automatically monitor inventory items. The data is then transmitted directly to your system. This then triggers automatic replenishment as needed. It’s a convenient way for your customers to manage their own parts inventory. It can also be done while still ensuring that you ship them the product they need, when they need it.

Another key part of the process

As a part of the consignment process, Supplier understands and agrees that title to and ownership in the Contract Product together with risk of loss for the Contract Product shall pass to Continental only upon withdrawal of Contract Product from the consignment storage location. Continental withdraws the Contract Product as needed according to production demand. Nonetheless, Supplier shall remain obligated to deliver the Contract Product in accordance to Continental requirements.

In addition to Delivery Schedules, the Supplier will receive further information about consignment stock level and movements in the consignment inventory. The implementation of Customer Managed Inventory  has benefits for both Supplier and Continental. Supplier will receive via EDI messages of Delivery Schedules and Inventory Reports (including consignment stock level and movements).

From the supplier side of the agreement

Supplier can use this information and the consignment inventory to optimize its logistics processes and provide the necessary flexibility within the lead-time. With this Supplier has more flexibility in arranging shipments. This is in case of CMI an extended window for early or late delivery for Logistics Supplier Evaluation. Details and further requirements for Customer Managed Inventory consignment process are agreed. This is done between the Parties in the respective contract and during the implementation of the agreement and scope of works to be delivered.

How this has worked during COVID-19

Currently, many organizations (such as grocery stores, telecommunications and IT infrastructure service providers, and construction facilities), outsource their inventory management to third party suppliers. The suppliers visit client facilities to count, record, and plan inventory. During regular business operations, this arrangement reduces labour costs for the client.

At this time, even with essential businesses staying open, many countries around the world are implementing stay-at-home policies, shelter-in-place orders, and lockdowns. This has resulted in many supplier organizations scaling back client site visits, or suspending site visits altogether. This course of action will reduce COVID-19 exposure, and protect the health and safety of employees and customers. However, this also results in many third party suppliers no longer conducting site visits at client facilities to track inventory. If your inventory levels are no longer properly tracked, your organization ends up dealing with inaccurate inventory counts, uncertainty in shipment and fulfilment capabilities, and ultimately, lost revenue.

How it was a success in these tougher times

The idea of customer managed inventory is to give your organization the ability to manage your own inventory. This is done by consuming, counting, and tracking inventory changes at your own facilities without the need for a third party service. Combine this with the ability for your staff to do this on the road and at remote locations using a mobile app, and you’ve got a solution that reduces human-to-human interaction while giving you accurate and up-to-date inventory information.

How this offering can be best implemented

The CMI solution is easily and quickly implemented via a cloud-based system like Clear Spider. Your staff can manage, analyze, and optimize inventory flow remotely, and even from their own homes. You can consume, count, and manage inventory items at your facilities, on the road, and at forward stocking locations. There’s full visibility, and you reduce exposure to other organizations being in your organization’s physical space.

Of course, you get the typical benefits of having a good inventory management system in place. This includes being quicker to respond to changes in customer demands. It also includes having lower cost overruns due to over and understocking. By shifting this information and control up the supply chain, the bullwhip effect is reduced and inventory orders will reflect demand more accurately.

How a service provider will look to work with you and help you

As a service offering to you, customer managed inventory services can help you increase sales by helping you avoid stock-outs by generating orders prior to stock depletion. Furthermore, this will help your company by reducing the administration time of inventory management. Also, your delivery time to your customers will improve by an increase. This in the efficiency of your supply chain and your shipping. This is what will decrease by minimizing last-minute rushed orders because of a lack of adequate inventory. One area that works so well in this way is in the workplace supplies arena. This is in where key supplies need to be delivered to site.

Overall

Several factors could contribute to the higher logistics and warehousing costs associated with implementation of inventory management at customer sites. For example, it could be that implementation requires companies to spend more on systems and technology. This is what is needed to track customer inventory information for multiple sites. In addition, the VMI organizations may lease space at customer warehouses as part of their inventory management practices. This would add to costs through the lease as well as through the operating costs associated with having offices at customer sites.