As 2019 has come to an end and manufacturers are evaluating demand for 2020, excess component inventory supplies will need to be addressed. The standard practice in the past would be for a manufacturer to either send their excess inventory list to a broker for a lot purchase, line item purchase or to engage in a physical consignment program.
Each of these programs have benefits based on the needs of the manufacturer, but there has been a growing trend toward manufacturers choosing a fourth option, which is a Virtual Consignment Program. A Virtual consignment allows the manufacturer the opportunity to control their inventory and maximize their financial return.
You control your inventory
With a Virtual Consignment Program, the manufacturer holds the inventory in their warehouse while the supplier partner markets the inventory to the supply chain. The two parties share a pre-negotiated split on the sale of the items.
The benefits of controlling your inventory:
Security and trust are two issues that concern clients when entering a consignment program with a new supplier partner. Virtual consignments allow the opportunity to build trust and show that the supplier partner will perform.
In situations where the manufacturer is not sure if they will consume the inventory in the future, Virtual Consignments allow them to keep their inventory onsite where they can pull inventory as needed. This reduces shipping costs and time.
Maximum financial return
A Virtual Consignment Program allows the greatest return on excess inventory due to several factors:
Shipping costs are reduced since the parts will remain in the manufacturer's inventory.
The supplier partner does not have to incur costs to warehouse the inventory.
The manufacturer keeps the parts in their inventory database and therefore does not buy parts that they currently have in stock.
To learn more about our Virtual Consignment Program, please contact Gerard@GerardEMG.com