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.Inventory Costs Money
Well, no kidding. Having the right amounts of inventory is also essential. But having EXCESSIVE inventory is a waste. With the right VMI program, the supplier is responsible for managing and replenishing your inventory on an AS NEEDED basis, thus reducing the need for substantial safety stock. The reduced inventory not only improves your cash flow but can lead to overall cost savings across your whole business model. Plus, keeping your inventory tight requires less warehouse space and fewer resources to manage it which have real monetary value.
Improve Time Management
Time is money. Undoubtedly, a cliche you’ve heard a gazillion times. But, cliche or not, it’s still true. When you employ a VMI program the vendor directly collects usage data in real time and replenishes inventory to predetermined levels. This relieves the purchasing department of the time required to analyze and calculate the need, as well as produce and submit purchase orders. Not only are you saving time (which, as we’ve noted, is money), but your operation becomes more efficient and productive as you and your team are able to move on to other critical tasks.
Again, because the vendor has direct, real-time access to usage information, there’s no need to wait for analysis or PO’s for replenishment activities to get into motion. This results in less time with sub-optimum inventory levels, and reduced risk of stock-outs. So, whether you need parts to satisfy customer needs, or to keep your production line from shutting down, proper inventory will always be on hand. This has tangible results to your bottom line.
With the responsibility falling on the vendor and the replenishment process automated there are fewer PO’s to cut reducing the opportunity to make errors (input of incorrect order quantities, etc.). You’ll lower costs simply by having fewer errors to correct.
In summary, a VMI program gives you a dedicated, expert set of eyes to monitor your inventory. You’ll rest assured knowing that you always have proper inventory levels while spending less time managing it; you’ll see a reduction in errors, and ultimately a reduction in your costs.
If you believe this is something that could benefit your business, Austin Hardware should be your next call. Our ABLE II VMI program offers your transparent reporting, quarterly audits, and value-added services such as custom parts kitting. At Austin we have all the tools, and the experience, necessary to be the VMI partner you need.
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