For example, say a supermarket chain predicts the buying patterns for a laundry detergent and communicates it to suppliers. The suppliers will then guarantee deliveries of a predetermined amount of laundry detergent based on the described pattern. These close ties with the certified supplier create a predictable pattern of order replenishment and ensure that the supplier will fulfill the order for Franklins. The CTP value stream lets you maintain a minimum of finished goods inventory and also lets your supplier carry a minimum amount of components and raw materials for the manufacturing process. However, you and your supplier must always be aware of varying lead times associated with certain materials and ensure that countermeasures are in place.
Gold is a good example.
Vendors do not always have access to gold, regardless of what they are willing to pay. Long lead times with raw materials such as gold require the vendor to keep a fairly robust amount of the material on site in order to meet customer demand. Meanwhile, another component in the finished product that uses gold may be very easy to obtain and require minimal onsite inventory. By working with the certified strategic suppliers, the vendor can host the inventory although it is still owned by the suppliers. This vendor-managed inventory guarantees that the vendor will always have the inventory available, even though it is not paid for until used.