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Benefits of VMI Inventory

by Valley Box Company on Mon, Jul 16, 2012

Vendor-Managed Inventory (VMI) is a planning and management system that is not directly tied to inventory ownership. Under VMI, instead of the customer monitoring its sales and inventory for the purpose of triggering replenishment orders, the vendor assumes responsibility for these activities. In the past, many suppliers operated vendor-stocking programs where a representative visited a customer a few times a month and restocked their supplies to an agreed-upon level, also known as min/max. Now, suppliers can monitor sales of their products  and decide when to initiate the resupply procedure.

inventory control system

There are many benefits of VMI inventory control:

  1. Ensures inventory is in stock when needed
    Daily demand-data alerts the supplier when inventory falls below order point calculations and restocking can happen quickly and seamlessly. This ensures inventory is in stock when needed and not before… or too late.
  2. Improve customer service
    Receiving timely information suppliers can better respond to customers' inventory needs in terms of both quantity and location.
  3. Reduce demand uncertainty
    Constantly monitoring customers' inventory and demand stream, the number of large, unexpected customer orders will dwindle, or disappear altogether.
  4. Reduce inventory requirements
    Knowing exactly how much inventory the customer is carrying, a supplier's own inventory requirements are reduced since the need for excess stock to buffer against uncertainty is reduced or eliminated.
  5. Reduce costs
    To mitigate the up front costs that VMI demands, it is suggested that manufacturers reduce costs by re-engineering and merging their order fulfillment and distribution center  replenishment activities.
  6. Improve customer retention
    Once a VMI system is developed and installed, it becomes costly for a customer to change suppliers.
  7. Reduce reliance on forecasting
    Customers running VMI programs eliminate their need to forecast.
  8. More focus
    Customers running VMI programs can turn their focus to what they do best, manufacturing their own goods or services. In turn, this offers a better quality product to the customer.
  9. Overall service level is improved
    Customers running VMI programs can focus more on their own product, In turn, this offers a higher quality product and service to the customer.
  10. A true partnership is formed between the Manufacturer and the Distributor
    Both companies work closer together and strengthen their ties. This benefit of a stronger partnership goes beyond VMI.

Visit our JIT page to learn more!

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This post was written by Valley Box Company

Valley Box demonstrates what is possible beyond just the typical wooden box. This specialty packaging manufacturer works with a wide variety of materials from wood to plastic, corrugate, metals and more. Discover how to take specialty packaging to the next level.

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