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. Equipment, cash in the bank, marketable securities, personnel and accounts receivable are all secondary to being able to supply the commodity that your customers 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 stock.

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 absolutely no sense to stockpile thousands of units for them to only become obsolete a few months down the line. The bearings industry, however, is unlikely to change. Indeed, bearings have not changed much since Leonardo Da Vinci sketched the first one 500 years ago! Bearings suppliers who have the resources and logistical infrastructure to invest in high levels of stock over and above what is “needed” give themselves a huge competitive advantage over those who stick to forecasted optimum stock levels and do so with very little risk.

An uncertain world

In 2010 the volcanic eruption of Eyjafjallajökull in Iceland caused chaos all over Europe. Commercial aviation was hugely affected all over the region and even as far afield as Canada. The knock-on effect to industry was, thankfully, minimal. The tragic tsunami that hit large parts of the APAC region the following year was far more devastating with many businesses’ logistics across the world badly affected.  These are just two recent examples of how vulnerable supply chains are to natural disasters. This is not to even mention things like strikes, transport disruptions and failure of manufacturers which all happen much more frequently. When supply chains are cut for even a short amount of time the result can be disastrous and, in these instances, it is the businesses who are holding stock that customers will look to. In the grand scheme of things, a bearing is a very small part of a wider project BUT it is integral to its functionality. A whole project being delayed because a bearing supplier has a shortfall in its inventory can be very costly. Whilst you can never hope to fully mitigate against the impact of such external factors, bearings suppliers who are able to hold an excess of inventory minimise their exposure to the risk and create a buffer against it.

Passing on the benefits

As with any industry, a bearings company that places large orders for stock will usually benefit from generous quantity discounts. These discounts are able to be passed directly on to the customer in the form of lower prices than those who are working on the optimum stock levels model. In addition to this, it gives the supplier a much greater degree of pricing flexibility; the optimum stock level model is dictated by an extremely rigid pricing structure that ensures X amount of stock is sold for X amount of pounds. Those holding large amounts of stock are able to enjoy a much more flexible approach to pricing as market demand dictates. 

Ever ready

In recent years markets have fluctuated wildly. Demand has peaked, dropped, risen and peaked again and again. With the best will in the world it is very difficult to predict these things and the best we can do is react positively to socio-political changes that affect the market. Companies who hold high levels of stock in the bearings sector are much better prepared for this market uncertainty. In times of plenty these companies are easily able to cover a sudden spike in demand for a particular product and when the market drops off they have tangible assets and will not suffer as much from soaring supplier costs and failure of manufacturers.

Stock holding

Interestingly, the most valuable aspect of holding a large inventory is the ability to hold stock for customers and stagger delivery. Many so-called “large companies” in the bearings industry will insist that a customer places a large minimum order, takes delivery of the whole order as soon as possible and pays for the whole delivery in one hit. This can be problematic for SME’s for a number of reasons: Firstly, customers want to take advantage of the discounts available on large orders, but lack the physical space to take delivery of the whole consignment. Secondly, paying for 6 or 12 months’ worth of components, for example, all at once impacts cashflow. Increasingly customers are looking for suppliers who can offer the option to hold stock for them until they actually need it and only pay for what is delivered. This is a much more attractive option for a great number of businesses; they can still take advantage of the price discounts but delivery and payment are spread out over a period of time.      

Security of Supply

Bowman International have invested heavily in stock over the past twenty years and now easily boasts one of the largest stocks of plain bearings in the world with a multi-million pound stock profile that covers thousands of catalogue types and various OEM products. Such a vast range of stock enables Bowman to offer its customers an abundance of cost and logistical advantages over many other bearings suppliers. “Security of supply” is the philosophy at the heart of Bowman International, which means they aim to give their customers complete peace of mind. Customers are able to rest assured that whatever they require Bowman will have it in stock and will be able to deliver it no matter what the markets are doing, no matter what is happening in the world!

Due to continued year-on-year growth of the company and constant expansion Bowman are also able to offer an invaluable stock-holding facility. Stock can be held at Bowman’s state of the art UK headquarters in the Thames Valley or at their brand-new facility in the West Midlands.

Bowman International are changing the game when it comes to logistical and cost benefits. More and more customers are realizing that they do not have to be tied to rigid delivery and payment terms and lead times and are taking advantage of the benefits that Bowman’s investment in stock can offer.


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