Metal Fabrication Resources by Blackstone Advanced Technologies

Blackstone Advanced Technologies Blog
Jan 10, 2020 9:00:00 AM

Supplier Managed Inventory: How Cutting Out the Middleman Increases Efficiency

Thinking of disintermediating your supply chain? While the middle has some roles to play in the supply chain, cutting them off also has some benefits.


Products pass through dozens of hands, from factories, warehouses, and shipments to stores. Almost all industries are characterized by middlemen who affect the overall efficiency and effectiveness of the manufacturer. Middlemen not only disconnect the manufacturers from the customers but also affect the delivery of goods, prices, and overall costs.


This article takes you through the multiple benefits of cutting out the middleman. Read on!



Better Market Forecasts


Almost all businesses depend on market forecasts for maximum operational efficiency. In a vendor-managed inventory, the manufacturer can foresee particular market dynamics with greater accuracy. Manufacturer can forecast demand, market prices, competition, and consumption patterns.


The market forecast might be impossible with the involvement of middlemen. The position of the middleman separates the manufacturer with the customer hence making it impossible to establish essential customer metrics.


There is a huge difference between data collected by a company’s channels and that from go-betweens and third parties. Market analytics generated from direct channels are more specific rather than generic.With accurate analytics, a business can improve on products, customize offers and promotions, and provide tailored customer service. All this is possible in the absence of middlemen.



It Creates a Better Customer Experience


Direct selling is the best way a brand can build a great relationship with its customers. It gives brands a chance to exercise complete control over their products. A brand that goes for a supplier managed inventory can convey the meaning and purpose behind its products and a distinct personality to help the products shine in the market.

A supplier managed inventory eliminates issues of stock-outs that occur with middlemen. The manufacturer links directly with retailers to ensure the right amounts of stock are available.


-customer experience


With a tighter manufacturer-retailer bond, customers rarely miss their favorite stocks. This business model thus creates a better brand reputation in terms of reliability. Positive customer experiences encourage brand advocacy and repeat purchases.



Cost Savings


Eliminating middlemen is imperative to maximum savings. Producer tends to save more on costs in a model where they link directly to the customer. Rather than incurring intermediary costs such as discounts to middlemen, the manufacturer can sell directly thus reducing such costs.


-cost savings


A supplier managed inventory cuts administrative costs, lost sales, and customer returns. Also, this model helps refine inventory control for distribution channels and ultimately lower costs to the end-user.



Supply Chain Efficiency


Eliminating middlemen in the supply chain reduces the logistics required when moving goods from the manufacturer to the consumer. This helps manufacturers to skip rather inefficient and inflexible middlemen and instead focus on the retailer and end-user.


Also, the manufacturer can link up, offer products, and ship to consumers quickly after purchases. Companies can as well respond promptly to customized orders due to the reduction of steps in the distribution chain. Higher efficiency in the supply chain increases revenue and customer satisfaction.



Price Control


With the absence of middlemen, a business can easily control prices. Selling directly enables brands to formulate their own pricing strategies. Price control helps to improve sales margins without the influence of varying price structures set by middlemen.



The Bottom Line


Supply managed inventory might be the best bet for companies and brands gearing towards efficiency. Depending on the type of goods that the manufacturer deals with, a supplier managed inventory can be the best business model to go for. It uplifts customer experience while saving on costs throughout the supply chain. For help on vendor-managed inventory, contact us and we will be willing to help.

Get My Free Talk