Inventory management is a lot like cappuccino: 10 years ago it was available only as a specialty item, but today it's even found in vending machines. Likewise, the terms JIT (Just-In-Time), bin stocking, consignment and value-added quickly became industry buzz words — and common offerings.

The goal behind inventory management can be summed up in one word — service. As a fastener and electronic hardware distributor, we sell "C" and "D" commodities that usually represent less than one-half of one percent of a finished product. The service we provide is the number one resource we can offer our customers — more vital than the products we stock.

While OEMs should never have to spend their own resources purchasing, inventorying and stocking commodities, they also should never find themselves lacking these items. The program needs to work for both the end-user and the distributor and distributors need to continually evolve inventory management.

Inventory management began about 10 years ago. Its simplest form is shipping product on a regular basis. Since OEMs run the risk of being over-inventoried if the distributor doesn't analyze past and projected use, programs such as Just-In-Time delivery and summary invoicing were developed.

Inventory management is no longer an added value — it's a necessity. Many manufacturers operate under the philosophy of $0 in parts and inventory at the end of every day. OEMs benefit from reduced inventory, decreased overhead and better allocation of their personnel resources.

Distributors who provide reliable inventory management solidify relationships with customers and build protection against competitors — even those offering lower prices. You have the ability to show customers a reduction in overall cost. As you gain the OEM's confidence with a successful program, the company will often increase the products in inventory management, which enhances the relationship with the customer.

For inventory management to work, you need to work closely with and gain the cooperation of your supply chain — on pricing, packaging and assuring the supply of products needed to stock end-users' shelves. Inventory management programs need to be flexible. While each program you run operates off the same business module, every user has individual needs and preferences. A smart distributorship must adjust to these differences.

For example, Customer A prefers Monday deliveries, but his neighbor, Customer B, wants deliveries only Tuesdays or Fridays. For you, this means deliveries to the same area two or three times a week, but to the customers it means you are a supplier willing to make things as easy for them as possible. Internally, you also must continually streamline procedures to run your programs efficiently.

What is the future of inventory management? For fastener and electronic hardware distributors, I believe the next level of service is to offer installed product — working with the OEM's component suppliers and subcontractors so that the OEM receives components with pre-installed fasteners.

The benefit to OEMs is a lower price and faster manufacturing process. Distributors can differentiate themselves by offerings that make them more partner than supplier.

And that's a relationship both OEM and distributor can toast with a cup of cappuccino.