v

Floor Stock Outsourcing

Floor stock of B and C items is often considered to have little to no strategic or financial value for many companies, yet it takes a lot of time and effort to stay on top of it.

While generally not strategic in nature from a sourcing perspective, they are as strategic as any other component when you run out of stock, affecting your production.

We analyzed our customers’ floor stock handling data and saved them 12% to 15% on TCO.

Do you recognize one or several of these symptoms?

  • null
    A lot of time is wasted in finding last-minute, ad-hoc solutions.
  • null
    The management of floor stock is looked at as a necessary evil, often not getting the much-needed focus, resulting into too many stock write-offs.
  • null
    Buying the same items at multiple vendors.
  • null
    Large stock of rarely used items, locking more capital than needed in your stock value
  • null
    Usually sourcing these floor stock items happens across many suppliers, many of them only used sporadically, adding complexity.
  • null
    Floor stock sourcing results in many small purchase orders, each with order and administration costs.
  • null
    Subsequently, these many small orders result in numerous deliveries with avoidable transportation costs.
  • null
    The resulting number of small invoices adds unnecessarily high administration.
Recognizing these common problems indicate that there is room for improvement to optimize the management of your floor stock.

It puts a burden onto the entire organization and creates unnecessary overhead, impacting multiple stakeholders

  • null
    Purchasing must deal with too many different suppliers for similar items, find last-minute solutions, and has to deal with too many small orders.
  • null
    Administration has to follow-up on too many suppliers, orders, and invoices.
  • null
    Reception and Warehousing need to deal with too many small deliveries.
  • null
    Production runs into floor stock shortages, leading to production stoppage in the worst case.
  • null
    Design and Planning are often unaware of the impact on sourcing and production, when selecting certain floor stock items in their design or planning.
  • null
    Inventory Management is suboptimal with a too large variety and incompatibility in brands.

Goals

The overall goal in optimizing floor stock management is to simplify the internal process, reduce the supplier complexity, optimize cost and increase the predictability and reliability across all stakeholders.

Solution and Approach

Datkan starts by analysing the current situation and detecting your floor stock needs on a project level.  From the available raw data that we compile during our intake, we extract all items that were purchased in bulk and booked as general costs, as a basis for our analysis.

This typically brings several common product groups to light, such as couplings, fasteners, fittings, electrical components, labels, etcetera, for which we then document and map the inefficiencies.

Experience shows that 80% of suppliers typically deliver less than 10 items. We see that for these floor stock items stock is replenished every two days on average, with less than 20% of the replenishment done in an optimal way.

From our analysis and experience we develop several scenarios, from which we collaboratively select the best applicable scenario for our customer.

Our analysis across our customers shows that:

  • almost 70% of items are rarely picked (less than once a quarter),
  • while less than 25% is picked regularly,
  • and only 5% are picked very frequent.

Benefits

We see that the expected total cost of ownership savings is between 6% and 21%, depending on the chosen scenario, excluding economies of scale cost price savings.

Benefits for each stakeholder:

  • null
    Purchasing gains time not having to deal with the sourcing of low value items and is able to focus their valuable time on strategic suppliers.
  • null
    Administration has to deal with a lot less invoices and has to follow-up on fewer suppliers
  • null
    Reception and Warehousing can once again focus on maintaining and optimizing the stocks.
  • null
    Production has more reliable floor stock availability, avoiding production issues.
  • null
    Design and Planning get a better grip on projects and are able to detect and resolve component bottlenecks sooner.
  • null
    Inventory gets continuously optimized towards the real need, with technical compatibility and uniformity in brands and types.

How can we help you?