What is Vendor Managed Inventory and Why Should You Care?

Most people in the logistics and supply chain industry have heard the term before. Vendor Managed Inventory or VMI is a process where the vendor creates orders for their customers based on demand information that they receive from the customer which then determines inventory levels, fill rates and costs. But why should you care?

With the implementation of an effective vendor managed inventory process, you will potentially receive the following benefits:

  • Complete real-time inventory visibility across your supply chain
  • Shorter lead times
  • End user can postpone inventory ownership
  • Accurately control the availability and flow of goods
  • Reduce or eliminate stock-outs and reduce uncertainty
  • Closer proximity to consumption point for increased service levels
  • Capacity to manage change or contain supply chain before it impacts end user

It’s Beyond Storage

VMI is about improving inventory visibility and automated product flow within a supply chain. This results in a timely and accurate inventory replenishment process between customers and their suppliers.

In order for VMI to be effective, communication is key for the most efficient movement and processing of products across the distribution chain.Through the use of web-enabled portals and EDI communications, greater visibility of materials and the ability to facilitate data transfer between parties is achieved. Since each customer’s business, processes, manufacturing requirements and goals may vary, VMI services have to be continually fine-tuned.

It’s About Partnership

A good VMI partner will facilitate the entire VMI process when they work with their customers and their suppliers. VMI solutions and systems should build upon proven information technology tools that include integration with your proprietary systems.

Other benefits that vendor managed inventory can provide are state-of-the-art handling and inventory tracking, accuracy, enhanced visibility of goods for faster turnaround times, and performance metrics for your decision support system. When looking at VMI solutions, look for systems that are also fully compliant for integration with leading ERP and supply chain applications in use today.

It’s About Stronger Relationships

Through the use of VMI, suppliers help to build stronger customer relationships. A supplier will not only provide bottom-line benefits to you, their customer, they also become a great resource and partner who provides insights into your inventory management and operational issues. When you implement VMI, you can potentially reduce your cost of sales due to better communication and partnership with your supplier.

If you want to learn more about the warehousing and VMI solutions G&D Integrated has to offer, fill in the form below or visit: http://gdintegrated.com/warehouse-services-metro-chicago/

About the author: Susan Himes is a Marketing Specialist at G&D Integrated.