For many companies, a Vendor Managed Inventory program is a better way to handle replenishment.

The natural question for you to ask now is … why? What are the benefits of having a supplier manage MY inventory?  In a word … MONEY.

Now that’s obviously an oversimplification. But when you break it down and look at all the different parts of the replenishment cycle a VMI program can impact, it becomes easy to see the benefits.  

Let’s take a more detailed look.

There are a number of options, and plenty of decisions to make for companies considering a Vendor Managed Inventory (VMI) program. Depending on a company’s goals, budget, and available resources they’ll have to decide on the type of VMI program, to what extent the VMI provider’s personnel will be used, how products in your program are going to be replenished and accessed, and more.

We’ll look at a few of these options in this post.

There are essentially two types of VMI programs

• Non-Consignment
• Consignment.

Both Non-Consigned and Consigned VMI programs offer customers a similar list of benefits, which you can read more about HERE.

Are you a manufacturing company? If so, does your business depend on inventory to get by? If you answered yes to one or both questions you might be familiar with a two-bin system. A widely used inventory management system, a two-bin system basically deals with two bins to help you or your team keep track of inventory. It helps you determine when inventory is full, low, and needs replenishing. A two bin system often exists in production lines where multiple parts come together to create a new product.

Why Do You Need Inventory Management Software?

Inventory management is a crucial part of your business and having a solid system in place to help you run business is as important as your inventory. If your business depends on inventory you need to be sure that you are running things smoothly. This means preparing for the future, having the correct levels of inventory, monitoring your supply chain and more. If you’re still doing things the old-fashioned way, it might be time to ask yourself: Why? Why deal with uncertainties, unnecessary business challenges, and headaches that ultimately cost you money when there is an easy solution for your business. If you’re using out of date systems like spreadsheets, two-bin systems, and anything else leaving room for error, it’s time to consider new methods for growing your business.

There are two types of VMI program – Non-Consigned and Consigned.

Both Non-Consigned and Consigned VMI programs offer customers a similar list of benefits, which you can read more about HERE.

In a Consigned VMI program, the inventory is put in place, but the customer doesn’t pay for it until it’s consumed. You can learn more about a Consigned program HERE.* 

* It should be noted that the benefits of Consigned expressed here are relative to Consigned VMI, not simply Consigned inventory. One can have Consigned inventory absent a VMI program.

The more traditional of the two programs is Non-Consigned VMI. In a Non-Consigned program, the customer pays for the inventory as it’s brought in, and whenever replenishment is necessary.

There are many ways that selecting the right Vendor Managed Inventory (VMI) partner can simplify your business and help you to start saving time, money, and improve your bottom line.

Let’s break down what VMI is all about.

So, what exactly is Consigned Vendor Inventory Management? Let’s break it down into two parts – Consigned Inventory and Vendor Managed Inventory.

Consigned Inventory is inventory that is still owned by the supplier, but the customer has on hand. When the customer uses or sells the inventory, the supplier THEN gets paid. There are a few reasons why this works, but a big one is that the customer frees up capital that would otherwise be needed to purchase the inventory in advance. This creates a form of financial security and freedom for the customer.

Vendor Managed Inventory, or VMI, is an inventory replenishment strategy in which the supplier monitors and may even physically replenish the customer's stock. When you form a VMI relationship with a provider, they handle the stress of inventory so that you can focus on other aspects of your business.

By letting the right provider manage your inventory, you can invest time in building relationships, increasing sales, and tackling other things that help your business reach long-term success.