Categories: Inventory Management
Have you ever gone into a chain retail store to make a purchase, only to find out that this specific location was all out of the product you wanted?
Chances are, someone at the store was able to check the computer and find exactly what you were looking for at another location. And even better, they might even be able to have it shipped directly to the store so you don’t have to drive far away to get it.
If you think of each store location as an individual company, this would be a prime example of inventory sharing.
Inventory sharing allows distributors and wholesalers to work together to virtually combine their inventories. Demand for a specific product or part would be fulfilled by whichever company has available inventory.
This doesn’t imply that one company would do all the work while another benefits from the profits. Rather, it creates a valuable partnership that helps all parties involved.
When done correctly, inventory sharing can have a major impact on the financial health of your company. Here are five ways this practice can increase sales and improve revenue.
It’s estimated that businesses lose more than a trillion dollars annually due to products being out of stock.
You can reduce some of that lost revenue with inventory sharing. If you are out of a specific part, you can avoid a backorder by utilizing one of your peer distributor’s inventory. The order gets filled, the customer receives what they want, and the partner frees up space in their warehouse. It’s a win all around.
Consider the above example, but from the perspective of the peer distributor. You have a surplus of a specific product that you just can’t sell. The parts are taking up valuable space in your warehouse that you’d rather fill with a product that has increased demand.
But then one of your inventory-sharing partners is able to take some of your surplus off your hands for one of their customers, and you get a cut for supplying your product. It’s another win all around.
With inventory sharing, you are technically able to advertise products for sales that you might never have had in stock – assuming your peer distributors do. This means you’re able to appear like a larger brand with more selection for customers and suppliers who need specific parts.
In addition, when you work with peer distributors, you are able to expand to new markets without the investment and resources of opening new warehouses or hiring new employees. Simply find a wholesaler in the location in which you’d like to enter, and use their products to send to suppliers in the area when they place an order.
Happy customers are repeat customers.
If you’re able to provide them the products and service they need in a timely fashion, they are more likely to purchase from you again. Inventory sharing can help you out with all of that. But if you make promises you can’t keep about product availability or backorder delivery time, you’ll lose out on their repeat business.
There’s no magic formula to determine if inventory sharing is a good fit for your company. For instance, you might not want to rely on another distributor to fulfill your orders. You simply need to look at your business goals and revenue projections to determine what impact working with a group of partners will have on your overall sales. Then contact WarehouseTWO to help you get started.