What is the Build To Inventory?
Build to inventory are goods manufactured and imported by a retailer to serve as a buffer inventory. It is also known as build to stock. Build to inventory is used to pre-stock products in different storage units to decrease transit times and deal with any unforeseen order spike.
Significance of Build To Inventory in an E-commerce Shipping and Delivery
Businesses leverage several advantages and can overcome any unforeseen situation regarding product misplacement or increased delivery spike through this approach.
- Reducing transit times: Strategic placements of products build to stock across storage units in specific locations can allow a merchant to decrease the transit. An information-based analysis enables a merchant to identify the sites with the highest order rates, creating an opportunity to accomplish the first and the middle mile even before they get an order.
- Dealing with unforeseen spikes and product misplacement: Build to inventory allows a company to take quick action when a product is misplaced during its transit. Similarly, the mentioned inventory will enable merchants to dispatch products without requiring them to finish the first and middle-mile shipping.
Prerequisites of Build To Inventory and How It Works
A merchant must have a contract with a third-party storage unit for storing a certain number of products for a definite period.
- Analysis and identification: A seller must identify the locations with a certain number of periodic order rate and their corresponding warehouses.
- Contract: The retailer contacted the specified warehouse with the storage requirements.
- Manufacturing and shipping: Build to inventory products are manufactured and shipped to the new storage unit per the decided product quantity.
Use Case with Build To Inventory
A merchant in Davao city has an average monthly order rate of 1,000 men’s footwear from Manila and 750 units of the same product from Cebu city. Therefore, the merchant signed contracts with warehouses in Manila and Cebu City to stock 1,500 and 750 units, respectively. It allowed the seller to decrease the transit time by an average of 3 days.