Is my inventory too big, too small or just right? These are questions that fastener distributors are asking themselves as they navigate a maze of growing customer demands, economic woes and offers to buy sophisticated, automated inventory systems.

With 50,000 SKUs and 14 locations, Porteous Fastener Co., of Carson, Calif., is one fastener distributor that doesn't mess around when it comes to inventory. The 400-employee master distributor uses a state-of-the-art, proprietary computer system that generates replenishments based on a 12-month history.

With over 1 million SKUs to replenish at the branch level – and over 40 tractor trailers making deliveries on a daily basis – Porteous Fastener works in both bulk and package, making inventory predictions that much more difficult.

"We have multiple lot sizes, so we use a 12-month history or replenishment system at the corporate level," says Jay Hebert, senior vice president of sales. "Then we push it out to the branches based on those numbers."

Requests for inventory transfers between company locations also play a key role in Porteous Fastener's inventory management plan. If the Cleveland branch needs an item that's not in stock, for example, a quick product transfer from another location typically takes just a few days and averts the need to purchase even more inventory.

"Our strategic plan is all about movement of product," says Hebert, adding that the current economy has forced the company to pare down to the right levels, while at the same time increasing its service levels.

Where Hebert sees the most significant inventory challenges is on special stock and release programs for just in time (JIT) users. "One of the big industry problems in recent years is the OEM pushing back through the JIT distributor, which makes inventory control very difficult," Hebert explains. "If an OEM changes its mind, obsoletes a product or goes under – as has happened in the last year or two – your customer can't afford to absorb all of that inventory."

In the next few months, Porteous Fastener plans to add more software to its coffers when it institutes a tracking system that will allow the company to know where every pallet is at all times. "We'll add that capability so that our employees can have better visibility of inventory and know where it is," says Hebert. "It's not a matter of how much inventory you have, but of where it is and how quickly you can get it to the customer."

About three years ago, Jamestown Distributors of Bristol, R.I., installed its first automated inventory system. Before that, its inventory management system consisted of another software system that didn't perform as expected and a manual system of 3 x 5 index cards where purchasing records were recorded.

These days, Jamestown Distributors and its 25 employees are handling inventory with a state of the art Eclipse software system. The company inventories 2,700 fastener SKUs mostly for marine industry customers. The company stocks SKUs less than three inches long that sell 500 or more units annually. According to John Mills, company president, that guideline was developed recently thanks to the software, which allows Jamestown Distributors to accurately track sales history and demand for every SKU.

"Inventory levels are based upon the recent past demand for each of those SKUs," says Mills. "The software alerts our buyers every morning about exactly what they should buy."

All such orders are first double-checked by the buyers, says Mills, who use their own knowledge and experience to buy more or less of the recommended product or postpone buys as they see fit. He says the new system has transformed the company into a more agile and flexible player in the marketplace, allowing it to operate with roughly half the inventory it had on hand five years ago.

It also allows for few purchasing mistakes, like the one Jamestown Distributors made a few years ago, before the new system was installed. "Our biggest problem is overstocked or obsolete inventory from past years," says Mills, who estimates that the company has about $40,000 tied up in 1,000 additional SKUs that the company no longer sells. The fasteners are sitting in the company's warehouse because of poor purchasing decisions and changes in customer buying habits.

And try as he might, Mills can't get rid of them. He's attempted to sell it, refuses to write it off and is hoping that someday a customer will want them, even if he has to sell them below cost. "We'd like to get something for them, but we've been unsuccessful at finding any outlet for these things," says Mills. "People don't buy fasteners unless there's a need for them – it's not the kind of product that people stock up on."

Mark J. Cunningham knows the value of a good inventory management program, and operates on a simple mantra: "We must have what the customer wants, when they want it and at a competitive price." As president of Wurth Snider Bolt & Screw in Louisville, Ky., Cunningham says fastener distributors' inventory philosophies have changed in recent years due to increasing customer demands.

"In the old school, you just bought a bunch of inventory and sat it in the warehouse, waiting for someone to buy it," says Cunningham. "Today, it's about aligning yourself with customers who have very specific, forecasted needs."

To do that, the company relies on several different systems – the most sophisticated being a high-tech MRP reporting system in which a customer's requirements are downloaded right into Wurth Snider Bolt's system. "We can match their needs versus what we have on hand, and see what we have on buy and detect any shortfalls," says Cunningham.

For other customers, the company uses forecasting based on historical trends that those customers create. Because not all customers are willing to forecast ahead, the distributor must rely on past buying data to predict what they'll need. "In these cases, we're looking more at historical data by customer to create the need for inventory," says Cunningham.

Wurth Snider Bolt also keeps a watchful eye on all special, non-stock items ordered and stocked for individual customers. To protect itself, the distributor uses "inventory protection" clauses. Cunningham explains: "It's our responsibility to manage general stock items. But when a customer has very special needs, then those customers must jointly agree on how to protect that inventory."

The problem arises when a customer suddenly stops using a particular item or items, leaving the distributors scratching their heads about how to unload it. "The customer needs to understand – through an agreement – that they're obliged for the inventory that we bring in for them," according to Cunningham. "All distributors should use inventory protection clauses. With them in place, distributors should be able to eliminate any major stocking or inventory issues."