Your supplier’s variability is sitting on your balance sheet

Most buffer stock isn't cover for your customers. It's cover for a supplier who quotes four weeks and sometimes means seven, and you're the one financing it.

By Steve 5 min read
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A distributor holds six weeks of cover on a component with a quoted four-week lead time. Ask why, and the answer is rarely about demand. It is about the fact that four weeks sometimes means five, and occasionally means seven, and the one time it meant seven the line stopped. The extra stock is not there to serve customers. It is there to absorb the difference between what a supplier promises and what a supplier delivers. That difference has a price. It is paid in cash, it sits on the…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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