Five Benefits of Buffer Stock
Buffer stock goes far beyond electronic components, semiconductors, raw die and wafer, or any other critical inventory needed by a manufacturer to maintain business continuity. Indeed, the idea of buffer stock has been around in some form since nearly the dawn of civilization, when farmers and hunter-gatherers would stock up on food to survive long winters. In today’s industrial environment, while the stakes do not quite rise to the level of life or death, a proper predictive strategy involving buffer stock to continue production during times of disruption can very well be the difference between success and failure, at least until the disruption ends.
Partstat’s Inventory Ownership Solution customers can acquire all the buffer stock needed for their schedules today, at today’s prices, with no upfront costs. This, in effect, opens up buffer stock to any manufacturer who qualifies for our solution, ensuring that anyone regardless of their budget or the amount of free capital they have available for investment. Plus, all Partstat customers can store their inventory in our own state-of-the-art storage facilities.
If you are wondering if a buffer stock strategy is right for your organization, here is a brief list of the main benefits buffer stock brings to the table:
1. Price Stability. There are myriad of reasons that could cause the price of critical inventory to increase on the open market and increase quickly. Raw materials shortages, unexpected part obsolescence, issues related to geopolitical tensions and tariffs — it all plays a part in dictating the basic supply and demand of any given product. One of the greatest benefits of buffer stock is, in the face of expected disruptions, it locks in current prices even if the market changes radically in the coming months or years. If supply is predicted to become constrained or disruption is expected, an ability to avoid costly markups can be a tremendous help to the bottom line.
2. Avoid Shortages. Beyond long-term cost savings, there is also an inherent benefit of simply having the inventory on hand when needed. Although in many cases this will require either warehousing space or the use of a third-party storage provider (which is included in a Partstat Inventory Ownership Solution), on-hand inventory means that there is no need to continually enter the marketplace on a just-in-time basis — a marketplace that could well be experiencing shortages or outright elimination of the part altogether. As a result of buffer stock, the window for potential risk is significantly lowered and production schedules can remain intact regardless of the state of the economy.
3. Supplier Discounts. The purchase of buffer stock in bulk eases the burden on the supplier, especially for part manufacturers who do not have to continuing turn their machines on and off. In many cases, such savings can be passed on directly to the customer.
4. Retain workforce. Unfortunately, in times of severe supply chain disruption, organizations have no choice but to look for any means necessary to reduce costs. One of the first actions, in many cases, is layoffs. Having buffer stock on hand to maintain production schedules greatly reduces the likelihood that such actions will be needed to maintain profitability.
5. Improved Strategic Planning. Buffer stock, more than anything, establishes exactly what production for a set amount of time will be while all nearly eliminating variables that could cause disruption — at least in regard to one specific part. This knowledge can have tremendous benefits for organizations that, for example, wish to take strategic actions to expand operations or develop new products. The more the future is known, the more secure future plans can be.