How do we cost a service visit?

Technician time plus vehicle cost per route, divided across the programs on it. A month of route logs is enough to start.

What do we do with programs that lose money?

Usually not cancel them. Change service frequency, reprice at renewal, or move Class C parts to a different supply method. The scorecard tells you which lever fits.

VMI and bin program margins in fastener distribution: how to find it in your records

The short answer

Fastener distributors win OEM and MRO accounts with vendor-managed bins, but each program carries costs that do not show up in gross margin: service visits, bins and labels, consigned or dedicated stock, and parts that stop moving when the customer changes a design. Measure profit per program after those costs, and check how much dedicated inventory has not turned in a year. Some programs are the best business in the building; others are carrying the stock and labor for the rest.

Where it hides in fastener distribution

Service visits

A route that counts and refills bins weekly costs the same whether the program buys a little or a lot.

Dedicated and consigned stock

Parts stocked for one customer that stop moving when an engineering change retires them.

Program pricing that never moved

Bin pricing set at the start of a multi-year agreement, while wire, plating, and freight costs moved.

Specials and Class C parts

Low-value parts with high handling costs that are included to win the program and never revisited.

The records to pull

Twelve to twenty-four months of each. Nothing needs to be installed or connected; a spreadsheet export is enough.

Invoice lines by program

Customer, program or ship-to, SKU, quantity, price, and cost.

Inventory

On-hand by SKU and location, dedicated or consigned flags, last sale date, and receipts.

Service data

Route or visit logs by program, technician time, and bin counts.

The ten-day test

Days 1–2

Have sales write down its most and least profitable programs. Hold out the last quarter.

Days 3–5

Attach service, bin, and carrying costs to each program and compute profit after cost to serve.

Days 6–8

List dedicated inventory with no movement in twelve months, by program, with its value.

Days 9–10

Confirm in the holdout and size repricing at renewal, service frequency changes, and a return or buyback on obsolete dedicated stock.

Specimen · illustrative figures

A $70M fastener distributor ran 140 VMI programs. Twenty-two lost money after service visits and carrying cost, and they held $1.9M of dedicated stock, $640K of which had not moved in a year. Moving low-volume programs to biweekly service, repricing at renewal, and negotiating returns on obsolete dedicated stock was worth an estimated $450K a year plus a one-time cash release.

Stop condition, written first

Stop if every program clears its cost to serve and dedicated stock without a sale in twelve months is below two percent of program inventory, in both periods.

What gets built if it holds

A program scorecard refreshed monthly, with service frequency and pricing reviews built into renewals and an obsolescence clause on dedicated stock. It runs inside your operation, belongs to you, and is measured weekly against the dollar range the test produced.

Sources

17Kaplan, R. S. & Narayanan, V. G. (2001). Measuring and managing customer profitability. Journal of Cost Management, 15(5), 5–15.

Specimen figures are illustrative and do not describe a Modven client. Reviewed October 10, 2026.

VMI and bin program margins in fastener distribution

Where it hides in fastener distribution

The records to pull

The ten-day test

What gets built if it holds

Asked often, answered plainly.

Where do you suspect the value is hiding? Tell us your hunch. Ten days later it comes back with numbers on it.