BUSINESS Purchasing, Inventory Management and Cash Flow not have access to purchasing factory direct, and you may also find that factory lead times are unacceptable. Modern factories are organized around production cells rather than traditional assembly line methods. Embracing techniques such as LEAN, (production system for elimination of waste), today’s factories are geared toward efficient production runs and operate on a make-to-need basis. Some factories, however, do maintain inventories of fast-moving items and may offer quick ship programs for limited stock keeping units (SKUs). Many domestic brand products are actually built by foreign factories that are owned by or captive to a brand. So, keep in mind that a domestic factory’s own supply chain may be driven by foreign import-type lead times, reliant on long-range forecasts. Factories typically maintain three kinds of inventory: raw materials, work in process (WIP) and finished goods. Some factories will also maintain what they call semi-finished goods. Unlike back in the day, contemporary factories do not like to warehouse or invest in finished goods inventory that is, by definition, inexorably committed to a particular finish or some other (probably irreversible) attribute(s). Instead, they are inclined to invest in raw materials and the much more flexible WIP or, better yet, semi-finished goods that can quickly become (by adding the final process steps) whatever finish or function may be required to meet demand. It’s all about maintaining a more flexible inventory. Is there a lesson here for dealer/buyers? Purchasing From Wholesale Distributors In North America, there are fundamentally three types of dis- tributors: national, regional and local. For dealer/purchasers or smaller industrial end users, a local distributor is theoreti- cally more attractive because you can stop by and pick up (at the “will call” counter) what you need in a matter of hours, without freight cost. But with the millions of SKUs required to service a huge va- riety of end users’ needs, it is virtually impossible for any local distributor to have more than a tiny fraction of SKUs in stock. Popular SKUs are probably available, but this is sometimes not much help — especially in retrofit and aſter-market jobs where we need to replace/match existing products, finishes and/or specific brands. Regional distributors tend to have larger warehouse facilities and, therefore, larger inventories. With available next-day or second-day delivery options, this can be a viable alternative for some, and the standard freight may be included in the price. National distributors oſten have multiple locations at which 14 KEYNOTES OCTOBER 2019 “It is ludicrous to complain about not having enough storage capacity when some of your inventory space is occupied by crap.” they stock inventory, are usually larger and financially stron- ger companies and, thus, can offer a much broader range of inventory — especially if what you need is not a very popular, fast-turning item. These companies likely also have the finan- cial wherewithal to extend credit more liberally, although are not necessarily willing to do so. Many distributors also offer technical resources and assistance (without charge). This can be enormously helpful, especially to smaller dealers/purchasers who may encounter a bewildering variety of unfamiliar products and brands. Purchasing From Big-Box Stores Big-box stores (“sheds” in the U.K. and some other parts of Europe) have evolved into carrying their own private-label brands of locks and other door hardware devices. They cater to smaller contractors and builders (also DIY consumers) and can sometimes be a viable generic product source, albeit lim- ited, for some buyers. Purchasing From Online Suppliers Unless you have just awakened from a 20-year coma, you’ve probably heard of an online company called Amazon. With a recent market capitalization (if unfamiliar with this term, it means stock price per share, times the number of shares out- standing) hovering around one trillion dollars, Amazon seems to be taking over planet Earth while leaving a pile of bricks- and-sticks retail bodies behind. We can buy just about anything from Amazon (including door hardware), and the fulfillment is typically done either di- rectly from an Amazon warehouse or, for door hardware, drop shipped from the source supplier’s warehouse. There is a whole new crop of online suppliers, and some buy- WWW.ALOA.ORG
