Inventory Outsourcing refers to the act of hiring a third-party vendor to supply the goods and components rather than internal manufacturing by the company itself. This process involves the development of numerous ancillary units near the main unit and helps each other mutually.
Now, a thought may arise that how this method of inventory management is beneficial for different organizations? To answer this question, we need to highlight the importance of outsourcing the inventory management system.
Benefits of Outsourcing Inventory Management
The process of outsourcing inventory management has a significant number of merits; the most beneficial ones could be listed as below:
- Outsourcing inventory management activity to a third-party vendor allows a company to focus on its core business thereby increasing the revenue.
- The overall efficiency of a business is enhanced to a great extent by incorporating the outsourcing of inventory management.
- Inventory outsourcing involves the fetching of goods and components from auxiliary units established nearby or in a certain region. This reduces the logistics and carrying costs of that company.
- The overall administrations’ costs are also trimmed down by implementing the inventory outsourcing system.
- The in-house manufacturing costs are reduced to a great extent by implementing this system.
- This method saves a huge amount of inventory space from being used up.
- The need for re-configuring production systems is even reduced by this method.
- The purchasing costs are lowered by this method and even the costs associated with unused inventories are also saved by this means.
- The expenditure is controlled as per the needs of the buyer, by outsourcing the inventories.
- Since the manufacturing is done at auxiliary units through third party vendors, the delivery timings of components or goods in highly accurate by the means of outsourcing inventory management.
The above mentioned points happen to be the greatest reasons to go for outsourcing inventory management to third party vendors and get the desired job done saving both time and money.
Existing Companies Implementing Inventory Management Outsourcing
Now, it’s time to have a look at some live examples of organizations which are already making the use of outsourcing inventory management to third party vendors. The largest companies in India which outsource their inventories outside are as follows:
Tata Motors is the biggest and the chief company in India to have made the use of Outsourcing Inventory Management to other third party vendors. The giant has developed many ancillary units around its manufacturing plants in order to fetch the parts or components on time and reduce the administration and logistics costs.
Maruti, the Automobile giant has even switched to cut on costs for its manufacturing aspect. It even satisfies its demand of automobile components through this technique. Over the past few years, Maruti has gained significantly on its expenditures on in house component manufacturing.
The gist of this technique of inventory outsourcing mainly revolves around the benefits which it renders to its users. One question is what we need to ask ourselves, “Does inventory outsourcing management help in capitalizing the manufacturing efficiency?
The answer will definitely come as “Yes, it helps.”