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.

If you’re considering vendor consolidation, you should consider that it is one of the easiest ways to control your supply chain. You are basically drastically reducing the number of vendors you deal with, therefore simplifying your business.

Let’s face it, there are a lot of things that need to get done, and only so many hours in the day to accomplish your tasks. When it comes to dealing with vendors, how do you manage this?

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 If you’re using out of date systems like spreadsheets, two-bin systems, and anything else leaving room for error, it’s time to consider new methods for growing your business.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.

What is Production Inventory?

If your business produces a finished good, then you may be familiar with the concept of production inventory. Simply put, production inventory is the amount of goods you have on hand to complete the manufacturing process. It’s all the parts and supplies your business needs to make your product. Production inventory is important to the manufacturing process and therefore important for your business.

To keep things simple; inventory management is the management of inventory and stock.  If your inventory is managed properly it will mean you always have the correct levels of stock on hand. This has a lot of benefits for your business. For some, this is easier said than done. However, having the right inventory at ALL times is a crucial component for your business.

Here are a few basics that help explain inventory management a little further:

Inventory 101:

If you are a business that sells or makes products, chances are pretty good that your inventory supply is the most important thing for your business. Sound like you? Your business depends on your inventory. Inventory is all the parts and products you have on hand at any given time. These could be for making goods, or actual products that you sell. The most important thing about inventory is having the right parts at the right time. Think of what would happen if you did not.

Now imagine a world where your inventory was always right, and you never ran out of parts. Sounds pretty good right? That’s where inventory management comes into play.

Click here to read 7 benefits to Vendor Managed Inventory.

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.

Is inventory the backbone of success for your business?  Do you have trouble forecasting demand and maintaining correct inventory levels yourself?  Do you have difficulty dealing with too many suppliers?

Managing large amounts of inventory and a multitude of suppliers requires daily monitoring, meticulous coordination, and careful planning, which may be difficult to do on your own. The ramifications of any missteps can be felt beyond the purchasing department, across your entire organization, from manufacturing to operations to payables and more. If you’re having difficulty with any aspect of inventory management, it’s VERY likely you can benefit from a Vendor Managed Inventory (VMI) program.

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.