What is VMI or Vendor Managed Inventory?

For many companies, a Vendor Managed Inventory program represents a better replenishment strategy.

Vendor Managed Inventory (VMI) is exactly what the name suggests. A program in which one of your vendors acts as a partner who takes on the day-to-day tasks and responsibility of managing your inventory.

For manufacturers, a VMI partner is usually a key supplier of component items, such as hardware, fasteners, or MRO products. Products for which it’s critical to strike the right balance between having enough to eliminate “line-down” situations, but not so much as to incur high carrying costs or run the risk expiration or obsolescence. The ideal VMI partner has the capacity to provide the majority of those parts which allows you to take greater advantage of the benefits of Vendor Consolidation.The VMI service provider works alongside you to implement a strategy based on your inventory management needs. They become an extension of you and your replenishment team, not a replacement.

Some of the additional benefits of a VMI program include:

• Improved fill and in-stock rates
• Reduced line-down situations
• Lower up-front inventory costs (for consigned programs)
• Lower freight and overall costs due to vendor consolidation
• Better data and more qualified inventory specialists monitoring
• Custom packaging and kitting programs
• Enhanced quality inspection
• Reduce theft via vending machines
• Support “Green” initiatives using recycled totes

A VMI program is not a cookie cutter, one-size-fits-all solution. Rather, every program can be as unique as a snowflake and vary in their structure from company to company. Every plan implemented is designed to support the customer based on their specific needs and goals.

Your VMI partner may undertake any number of daily tasks. They’ll often include:

• Monitoring inventory levels
• Analyzing and forecasting future needs
• Making automatic inventory adjustments
• Placing replenishment purchase orders
• Physically restocking inventory

The word “synergy” is often used to describe successful business relationships. As defined by Merriam-Webster, “Synergy is the benefit that results when two or more agents work together to achieve something either one couldn't have achieved on its own. It's the concept of the whole being greater than the sum of its parts.”

A VMI program is the perfect example of how a supplier can become much more than JUST a supplier. The right VMI partner becomes an asset to you, your department, and your company that, along with your internal resources, creates a highly beneficial synergy.

If you believe your company might benefit from a VMI program, and you would like to learn more, we invite you to click HERE.

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