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Just In Time vs Consignment in the Diemaking Industry

The automotive industry has coined the Just In Time process of minimizing inventory to where a supplier has real time accounting for what is left in inventory so that they can restock with a minimum amount necessary.  The goal is to reduce inventory costs.  It does a great job for them and works well.  But what if the products being made are not always the exact the same?  What if there were a multitude of sku numbers for a supplier to keep track of, with some of the items used sparingly?  Logistics in these cases can be a costly nightmare.

For the diemaking industry what we have found to be extremely successful is the use of consignment.  In 2017 well over 67% of our income came through consignment customers and it appears that percentage will be even higher in 2018.  Consignment basically is a customer pulling from a suppliers inventory that happens to be stored in the customers location.  Reporting of the usage amounts is communicated back to the supplier a few times a month.  Those usage quantities are compared against what the total inventory count was a the beginning of the month for verification and also for determining how much material will need to be restocked.  The ideal goal we strive for is to put 6 weeks of inventory on a customer’s floor and restock every 4 weeks.  By doing this it is rare that a customer runs out of a product even during spikes in business.  We even have an on line, password protected system that works on computer or smart phone to make it that much easier to manage the inventory.  Many of our customers have said that this program has saved them a ton of time and allowed them to focus more on other areas of their business where it is not so organized.

If you have a lot of money tied up in inventory sitting on your floor or if you find that you keep running out of material and having to spend the exorbitant amount of money to overnight boards, talk to us about consignment.  It could the key to simplifying your business and saving you money.

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