If you’ve spent any time in contract manufacturing, you know that flexibility is the name of the game. With highly variable projects with a wide range of order quantities, it can be tough for contract manufacturers to manage quality and inventory without eating up the costs. Although it may feel impossible at times, we know better than that, because we’ve helped countless customers navigate complex contract manufacturing challenges over the years. The following are just a few instances where we helped contract manufacturers scale with confidence.
The Advantage of Vendor Managed Inventory
One medical device manufacturer was fighting an uphill battle against inventory demands that would shift drastically from week to week. As demand for their product would spike sporadically, they often found themselves in one of two scenarios. In one scenario, they were scrambling to procure enough material to meet demand; in the other, they were overpaying to hold onto inventory in preparation for the next spike. More often, it was the latter, as they had to meet minimum order quantities with their mill of choice to obtain wires ranging in diameter from 0.003” to 0.040”. Not to mention, the mill had exceptionally long lead times for the products they needed. It was a lose-lose situation for them to have to choose between cutting their orders close or dealing with high inventory expenses.
When they turned to Boston Centerless, we carefully evaluated their pain points from every angle. Finally, it was decided that this manufacturer, being on the east coast, was the ideal candidate for our Vendor Managed Inventory (VMI) program. The name speaks for itself—we began managing their inventory to drastically reduce their holding costs.
There were a few pieces to this puzzle. The first was that we had to establish a min/max inventory level for each of their material sizes. Next, we would prepackage a certain quantity of materials to be ready for their next shipment. These materials would be held by us at a local distribution center. Prepackaging the materials with reusable packaging to match their existing inventory system helped save time both before and during delivery. Finally, we would deliver exactly what they needed week to week, eliminating the headache of their previous vendor’s minimum order quantities and long lead times.
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Saving Time With Dock to Line Delivery
Every supplier has room to grow… sometimes, even us. This customer’s case is a perfect example of that.
One east coast manufacturer had already implemented a dock-to-stock program with Boston Centerless, but over time they found that the program didn’t quite meet their needs. They wanted to streamline their internal processes to get material straight to their manufacturing lines, thereby bypassing both the receiving department and stock room. Additionally, they wanted to reduce packaging costs, which had become excessive. Once material made it through the stock room, it had to be repacked in material containers to be issued to the shop floor—yet another reason to want to get material straight to the manufacturing line, rather than moving through their current workflow.
We heard their challenges, and had extensive discussions to realize how we could solve their pain points. Ultimately, we decided to do something we’d never done before. From this project, Boston Centerless developed an all new dock-to-line delivery program.
The dock-to-line program delivered materials directly from one of our distribution centers to their shop floor. These materials were packaged in the material carriers that are used in their manufacturing process, thereby eliminating the need for the product to move through the stockroom at all. This not only freed up storage space for the manufacturer, it also helped reduce labor costs associated with repackaging their materials onsite and transporting them to the shop floor.
We deliver to this customer twice a week to help them keep up with production demands, with minimal inventory costs. We’re proud to report that this new program has been instrumental in our customer’s success, making it a success for us, too.
What’s not working for you? Contact us today to start building your custom supply chain solution.
Locking In Long-Term Price Contracts
What if it’s not the delivery of the material that makes things challenging, but the cost of the material itself? That’s what one medical implant customer was faced with when ordering CCM alloy with a high monthly demand. Cobalt, a key element in this alloy, was subject to extremely volatile surcharge pricing. As a result, the CCM alloy’s price would fluctuate drastically, too. This customer didn’t know what to expect on their bill from month to month, with variances of thousands of dollars seemingly being the norm. This customer was also using several different sizes of product, so with the surcharge volatility and multiple part costs combined, they struggled to maintain consistent pricing to their customers.
The Boston Centerless team knew right away that a case like this would require an extremely in-depth cost analysis. We got to work right away on developing a plan to present to our own CCM supplier. This plan included a 12-month pricing agreement, based on demand for each part size and demand for cobalt. Additionally, through our analysis we found that the customer could consolidate some of their smaller volume orders along with their two highest volume orders, and thereby take greater advantage of by-volume order discounts. With everything laid out, we took our proposed annual pricing agreement plan to our CCM supplier and negotiated terms to lock in pricing and scheduled deliveries for this customer for a full year. Just like that, the volatility that had been the bane of their supply chain was completely gone, giving both them and their own customers peace of mind through some much-needed stability.
Like with the last customer, this one also utilizes unique packaging for their production lines. So, we package it for them and hold it in stock until they request a delivery. That’s material cost savings, packaging cost savings, and material handling cost savings, all from one provider.
We provide numerous services under one roof—and we see savings where others don’t. If you’re ready to see where you can save, contact us today to get started.
Boston Centerless supports manufacturers facing highly variable demand through programs like Vendor Managed Inventory (VMI). By establishing min/max levels, prepackaging materials, and stocking inventory locally, they reduce holding costs and eliminate issues caused by long mill lead times or minimum order quantities.
Their dock-to-line program eliminates the need for materials to pass through receiving and the stock room. Materials arrive packaged in carriers used directly on the production floor, reducing labor, storage needs, packaging waste, and time to operation.
