Vendor-managed inventory, a.k.a. VMI, is a business model structure designed to improve inventory management and order fulfillment. This model streamlines a company’s ordering process and reduces lead times. VMI is designed so the buyer of a product provides certain information their supplier of that product and the supplier then takes full responsibility for managing an agreed inventory of the material. The inventory is usually stored at the customer’s location where the products are used or sold. The goal of a VMI program is to establish a mutually beneficial supplier-customer relationship in which both sides will be able to accurately and efficiently manage the availability and flow of stocked items.
In regards to the customer, having a your supplier’s sales representative stop in at your facility weekly, bi-weekly or monthly to manage your inventory can not only help you unload the responsibilities of purchasing and inventory forecasting. It can also help you identify and address other related issues in your business that you would not have noticed otherwise. This is where the emphasis on the supplier-customer relationship can prove to be incredibly valuable.
When a supplier sees that its customer is almost out of inventory on a specific product, the representative will plan accordingly to ensure more product is ordered in and the proper amount of inventory is consistently stocked at the customers location. This eliminates the concern for downtime or out-of-stock related issues. From an MRO perspective, a supplier representative who is in charge of a VMI program is also on-site to assist the customer with product expertise and application recommendations. The sales representative can make sure the customer is using the proper product for their applications and make any adjustments or changes to the product being used by the customer as issues or concerns arise.
VMI helps prevent overflowing warehouses or shortages, as well as costly labor, purchasing and accounting efforts associated with these processes. With VMI, businesses maintain an appropriate inventory level and optimized inventory leads to easy access and fast processing with reduced labor costs. Another benefit and key to making VMI work is shared risk. In some cases, if the inventory does not sell or is not used, the supplier will repurchase the product from the customer in an attempt to ensure that neither party is stuck holding onto dead inventory. The supplier can often times sell that same product do a different customer they work with.
With our VMI program, our reps are here to be the expert you need onsite at your facility to assist you with this inventory planning process. Ask one of our experts how a customized program can produce results for you and your business.