The paradox of “optimum stock levels” within the bearings industry

One of the most important assets of any bearings business is stock and the ability to react quickly to customer needs. Effective bearing stock management is fundamental to maintaining customer satisfaction and ensuring continuity of supply. Equipment, cash in the bank, marketable securities, personnel and accounts receivable are all secondary to being able to supply the products your customer’s demand. If you cannot efficiently meet demand, customers will look for a supplier who can. Here we analyse the myriad benefits of bearings suppliers investing in high levels of bearing inventory.

The Higher the Excess, the Lower the Risk

There is an argument to be had that forecasting “optimum stock levels” and only holding what is needed to cover predicted demand is the best option for businesses. It is certainly the option that most accountants would opt for as it looks great for the bottom line, but what looks good on spreadsheets and financial forecasts does not always tell the whole story.

In industries where technology is constantly changing, it makes little sense to stockpile thousands of units that may become obsolete a few months later. The bearings industry, however, is unlikely to change. Indeed, bearings have not changed significantly since Leonardo da Vinci sketched the first one more than 500 years ago.

Bearing suppliers who have the resources and logistical infrastructure to invest in stock levels for bearings above forecast demand give themselves a significant competitive advantage over those who rely solely on minimum inventory models, while carrying relatively little risk.

An Uncertain World

In 2010, the volcanic eruption of Eyjafjallajökull in Iceland caused disruption across Europe, severely affecting commercial aviation. Although the impact on industry was relatively limited, the devastating tsunami that struck parts of the Asia-Pacific region the following year created major challenges for global logistics.

These are just two examples of how vulnerable supply chain bearings operations can be to natural disasters. Added to this are strikes, transport disruptions and manufacturing failures, all of which occur far more frequently.

When supply chains are interrupted, even for a short period, businesses holding substantial bearing inventory are often best positioned to support customer demand. Although a bearing is only a small component within a larger system, it is often critical to the operation of the equipment. Delays caused by unavailable bearings can have significant financial consequences.

While no company can completely eliminate supply chain risk, suppliers investing in larger stock holdings can significantly reduce their exposure and provide customers with greater bearing availability.

Passing on the Benefits

As with any industry, bearing companies placing larger stock orders often benefit from substantial quantity discounts. These savings can be passed directly to customers through more competitive pricing than businesses operating with minimum inventory levels.

Holding larger inventories also provides greater pricing flexibility. Companies following strict optimum stock models are often constrained by rigid pricing structures, whereas businesses with larger inventories can respond more effectively to changing market demand.

Ever Ready

In recent years, markets have fluctuated dramatically. Demand has risen, fallen and recovered repeatedly, making accurate forecasting increasingly difficult.

Companies that invest in larger stock holdings are better prepared for this uncertainty. During periods of increased demand, they can respond immediately, while during quieter market conditions they retain valuable physical assets and are less exposed to supplier price increases or manufacturing shortages.

Stock Holding

Interestingly, one of the greatest advantages of maintaining extensive inventory is the ability to offer bearing stockholding services for customers by staggering deliveries.

Many suppliers require customers to place large minimum orders, take delivery of the full quantity immediately, and pay in full at the time of shipment. For many SMEs, this presents two significant challenges.

Firstly, customers want to benefit from volume discounts but often lack sufficient warehouse space to receive complete orders.

Secondly, paying for six or twelve months’ worth of components upfront can put unnecessary pressure on cash flow.

Increasingly, customers are looking for suppliers who can hold stock on their behalf until it is required, delivering products in scheduled releases while invoicing only for what has been supplied. This allows customers to benefit from competitive pricing without compromising storage capacity or working capital.

Security of Supply

Bowman International has invested heavily in bearing stock management over the past twenty years and now holds one of the largest stocks of plain bearings in the world. Its multi-million-pound inventory includes thousands of catalogue products alongside a wide range of OEM components.

This extensive bearing availability enables Bowman to provide significant commercial and logistical advantages over many other bearing suppliers.

“Security of Supply” sits at the heart of Bowman International’s philosophy, giving customers confidence that the products they need are available whenever required, regardless of market conditions or global supply chain disruption.

As part of its continued year-on-year growth, Bowman also offers a comprehensive bearing stockholding facility. Products can be stored at the company’s state-of-the-art headquarters in the Thames Valley or its modern distribution facility in the West Midlands.

Bowman International continues to redefine the commercial and logistical benefits of strategic stock investment. More customers are recognising that they no longer need to accept rigid delivery schedules, payment terms and lengthy lead times, instead benefiting from the flexibility and security offered by Bowman’s investment in inventory.