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How much stock should your bearing supplier hold?

Bowman International Ltd (incorporating Oilite Bearings)visit website

 

One of the most important asset of any bearings business is stock because it provides the ability to react quickly to customer needs. But customers also stand to benefit in other ways when their bearing supplier holds high levels of stock, as Craig Clydesdale of Bowman International explains.

How much stock should your bearing supplier hold?There is an argument to be had that forecasting 'optimum stock levels' and only holding what is needed to cover predicted demand is the best option for businesses. It is certainly the option that most accountants would choose as it looks great for the bottom line; but what looks good on spreadsheets and financial forecasts does not always tell the whole story. In industries where technology is constantly changing it makes absolutely no sense to stockpile thousands of units for them to only become obsolete a few months down the line. The bearings industry, however, is unlikely to change. Indeed, bearings have not changed much since Leonardo Da Vinci sketched the first one 500 years ago! Bearing suppliers who have the resources and logistical infrastructure to invest in high levels of stock over and above what is 'needed' give themselves a huge competitive advantage over those who stick to forecast optimum stock levels and do so with very little risk.

Guarding against vulnerable supply chains

In 2010 the volcanic eruption of Eyjafjallajökull in Iceland caused chaos all over Europe. Commercial aviation was hugely affected across the region and even as far afield as Canada. The knock-on effect to industry was, thankfully, minimal. The tragic tsunami that hit large parts of the APAC region the following year was far more devastating, with many businesses' logistics across the world badly affected. These are just two recent examples of how vulnerable supply chains are to natural disasters. This is not to even mention things like strikes, transport disruptions and failure of manufacturers, which all happen much more frequently. When supply chains are cut for even a short amount of time the result can be disastrous and, in these instances, it is the businesses who are holding stock that customers will look to. In the grand scheme of things, a bearing is a very small part of a wider project BUT it is integral to its functionality. A whole project being delayed because a bearing supplier has a shortfall in its inventory can be very costly. While you can never hope to fully mitigate against the impact of such external factors, bearing suppliers who are able to hold an excess of inventory minimise their exposure to the risk and create a buffer against it.

Flexible pricing

As with any industry, a bearing company that places large orders for stock will usually benefit from generous quantity discounts. These discounts are able to be passed directly on to the customer in the form of lower prices than those who are working on the optimum stock levels model. In addition to this, it gives the supplier a much greater degree of pricing flexibility; the optimum stock level model is dictated by an extremely rigid pricing structure that ensures X amount of stock is sold for X amount of pounds. Those holding large amounts of stock are able to enjoy a much more flexible approach to pricing as market demand dictates.

Fluctuating demand

In recent years markets have fluctuated wildly. Demand has peaked, dropped, risen and peaked again and again. It is very difficult to predict these things and the best we can do is react positively to socio-political changes that affect the market. Companies that hold high levels of stock in the bearings sector are much better prepared for this market uncertainty. In times of plenty these companies are easily able to cover a sudden spike in demand for a particular product and when the market drops off they have tangible assets and will not suffer as much from soaring supplier costs and failure of manufacturers.

Cashflow

Interestingly, the most valuable aspect of holding a large inventory is the ability to hold stock for customers and stagger delivery. Many 'large companies' in the bearings industry insist that a customers place large minimum orders, take delivery of the whole order as soon as possible and pay for the whole delivery in one hit. This can be problematic for SMEs for a number of reasons: first, customers want to take advantage of the discounts available on large orders, but lack the physical space to take delivery of the whole consignment; second, paying for 6 or 12 months' worth of components, for example, all at once impacts cashflow. Increasingly customers are looking for suppliers who can offer the option to hold stock for them until they actually need it and only pay for what is delivered. This is a much more attractive option for a great number of businesses; they can still take advantage of the price discounts but delivery and payment are spread out over a period of time.

Security of supply

Bowman International has invested heavily in stock over the past 20 years and now boasts one of the largest stocks of plain bearings in the world, with a multi-million-pound stock profile that covers thousands of catalogue types and various OEM products. Such a vast range of stock enables Bowman to offer its customers an abundance of cost and logistical advantages over many other bearings suppliers. 'Security of supply' is the philosophy at the heart of Bowman International, which means the company aims to give its customers complete peace of mind. Customers are able to rest assured that whatever they require, Bowman will have it in stock and will be able to deliver it no matter what the markets are doing, and no matter what is happening in the world!

Due to continued year-on-year growth of the company and constant expansion, Bowman is also able to offer an invaluable stock-holding facility. Stock can be held at Bowman's state-of-the-art UK headquarters in the Thames Valley or at its brand-new facility in the West Midlands.

Bowman International is changing the game when it comes to logistical and cost benefits. More and more customers are realising that they do not have to be tied to rigid delivery and payment terms and lead times and are taking advantage of the benefits that Bowman's investment in stock can offer.

Follow the link to find out more about the products and services offered by Bowman International.

17 April 2018

Bowman International Ltd (incorporating Oilite Bearings)visit website
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