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Industrial supply companies provide large manufacturing companies and businesses with heavy equipment and MRO’s (maintenance, repairs, and operation equipment) that are needed for general operations. Generally, a company will choose one industrial supply company that offers everything they need all in one location. This can include all the supplies and tools needed to perform each operation along with thousands of everyday products vital for operations. An industrial supply company is usually located near the business that they are supplying to. This is due to large shipping costs of heavy equipment that must be shipped on trailers. The closer the warehouse or supplier is, the cheaper the costs will be for the company.
Improving Business Operations and Reducing Costs
According to recent study, Hendricks and Singhal (2006) investigated how product introduction delays affected operating performance. Based on a diverse set of 450 firms that experienced product introduction delays, they reported that delays have a statistically significant negative effect on profitability; in particular they observed an average decline of 5.99%-7.62% on Return on Assets (ROA) and 12.59%-16.65% on Return on Sales. To improve the quality of critical business operations and to reduce costs, many companies are turning to industrial supply maintenance and repair operations (MRO) to manage inventory, shipping, supplies, and equipment needed to efficiently run their businesses.
Industrial Supply Service Advantages
Suppliers of industrial equipment generally offer services such as parts delivery, inventory management, equipment performance testing, and equipment maintenance. This can be done in-house; however, many businesses are finding it more economical to outsource tasks relating to industrial supply. Industrial supply service providers take on the full responsibility of managing a businesses inventory. This includes implementing IT solutions, which generally includes warehouse management software, to closely monitor product inventory, maintenance and sales.
Meeting the Needs of Businesses
Staying stocked with the necessary materials helps to improve business productivity, which ultimately increases a businesses return on investment. Inventory supply companies offer specialized services, which give businesses using these services an advantage. Corporations now have knowledge and expertise on stocking and supplying merchandise that they otherwise would not have. Having the tools and supplies in place that allows businesses to get inventory to the right places at the right time ensures that they are always able to meet clients’ needs, which is vital to keeping their businesses in operation.
Gaining a Competitive Advantage
By using inventory supply solutions to streamline the management of inventory, there is more time to efficiently run the business. Automated services allow businesses to place and submit orders electronically, and many inventory supply companies allow businesses to expedite their orders as well, thereby enhancing the quality of customer service. This ensures that customers always have the products that they need when they need it, and this great service is what keeps customers loyal.
The decision of whether to maintain industrial supply internally, outsource it, or keep a mixture is not without potential problems. What type of system you should use in your warehouse operations, such as using a warehouse management system (WMS) or an Enterprise Resource Planning (ERP) system, is another issue that should be considered carefully.
Disadvantages of Decentralization
Some large MRO providers have a centralized business model, whereby growth has come from process integration as well as control mechanisms. Most providers have adopted a decentralized model where they have acquired competitors and repositioned them as local subsidiaries. These providers have effectively acted independently, which has meant that when cost cutting has been required, they have not had the required integration to implement this successfully.
Detailed and Clear Business Plans
The whole industrial supply chain has become a complicated but vital part of business today. Without comprehensive plans that are easily understandable by all involved in this process, whether external or internal, you may find much inefficiency and wastage creeping into your industrial supply system.
Managing Risk Inherent in Global Outsourcing
Most firms have cut costs by outsourcing their MRO supplies. In 2009, the volume of MRO in Europe exceeded $119 billion, with forecasts for 2014 at around $122 billion. Outsourced MRO will grow to $82 billion by 2014. The risks of this outsourcing are often not even considered or assessed properly. Outsourcing should not be a quick method to cut costs, but should be considered strategically as part of a comprehensive business plan.
Managing Warehouse Inefficiency and Wastage
Modern day warehouses can often be the scene of products not being able to be found and queues of delivery trucks waiting to be unloaded. The complexity of managing supplies properly means an effective method of organizing your warehouse operations is needed. At some stage in a company's growth, an efficient warehouse management system will need to be considered to reduce this inefficiency. Otherwise, you may find that your competitors will gain a competitive advantage.
If your company decides on an outsourcing solution to your current industrial supply process, then you will have to negotiate a deal with a supplier of MRO services. You will have to consider the price of the contract along with the stability and efficiency of the supplier.
If you decide to implement an internal solution using a warehouse management system, such as Microsoft Navision, you will need to specify your needs and requirements to the company providing the software. The cost will be based on how many people use the software, whether it is located on site or not, and what training you will need.
According to Palle Petersen the improved workflow derived from using a warehouse management system can save 20% to 30% of employees' time. This is due to mundane tasks being made obsolete and the time saved from locating supplies quickly. You should compare these potential savings to the cost of implementing a solution to improve your industrial supply process.
A company that supplies a business with heavy equipment will usually provide excellent customer service and maintenance on the equipment. They do this to assure your business of quality service in the future. A supplier can provide your business with all of the needed equipment to perform daily jobs. A problem arises with an industrial supply company when their manufacturing customers decided to outsource their business and equipment. This causes a loss of business for the supply company. As long as the supplier keeps the company stocked with merchandise and is saving money, it is much more efficient for a company to purchase from an industrial supplier.
Industrial supply refers to the industrial supply distribution chains of manufacturers of industrial goods. The term should not be confused with industrial supplies, which is a subcategory of industrial goods. The industrial industry consists of companies that sell materials to other businesses, so they can make their products. Industrial manufacturing falls into five general categories: installations, accessory equipment, raw materials, fabricated parts and materials, and industrial supplies.
The quality of your company's industrial supply chain distribution will determine its success in the marketplace. Quality supply chains have an integrated system to get products to customers, have a high rate of inventory turnover, and achieve significant returns on assets. Some of the more successful industrial supply companies have focused on integrating their local supply chains with global distribution networks. Others have made supply chain improvements by leveraging emerging technologies. As a sign of the times, some industrial supply companies have improved distribution by entering the social network arena, establishing closer relationships with suppliers, dealers, clients, and consumers.
If you are interested in industrial supply or want to improve your company's current prospects, there are various trade associations that focus on networking for business growth, education, and industry promotion. One of the main organizations is the Industrial Supply Association. Read more about industrial supply from the links on this Business.com page.