Vendor-managed inventory, also known as VMI, is a business model approach to inventory management and order fulfillment which streamlines a company’s ordering process. This model is designed so the buyer of a product provides specific information to a supplier of that product and the supplier then takes full responsibility for managing and maintaining an agreed inventory of the material. This inventory is most often stored at the customer’s location where the products are used or sold. The goal of a VMI program is to establish a supplier-customer relationship where both sides will be able to accurately and efficiently manage the availability and flow of stocked items.
For the customer, having your supplier salesrep stop by your location weekly, bi-weekly or monthly 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 be aware of on your own. This supplier-customer relationship can prove to be incredibly valuable.
When a supplier can see that its customer is about to run out of inventory on a specific product, the representative can plan accordingly to ensure the proper amount of inventory is ordered to be stocked at the customers location eliminating the concern for downtime or out-of-stock related issues. From an MRO point of view, 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 rep can make sure the customer is using the right product for their applications and make any adjustments or changes to the product being used by the customer if needed.
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.