Benefits of Vendor management inventory
Vendor Management Inventory or VMI is a business strategy where the supplier of goods or services takes the responsibility of managing the inventory levels of their customers.
Instead of customers managing their own inventory, the supplier monitors inventory levels in real-time and makes replenishment decisions in sync with the pre-determined inventory levels agreed upon between the supplier and the customer.
What are the benefits of VMI to both suppliers and customers?
- Reduced inventory holding costs for customers: VMI can help customers minimize the cost of inventory by allowing them to maintain low inventory levels. As suppliers manage the inventory, the customers need not have to hold much safety stock.
- Increased efficiency and cost savings for suppliers: Suppliers can optimize their production and delivery processes by having a greater insight into their customer’s inventory levels. This will help suppliers minimize waste, lowers costs and enhance overall efficiency.
- Improved inventory turnover and cash flow for customers: Customers can maintain low inventory levels and thus minimize the inventory holding costs thus improving their inventory turnover and cash flow.
- Enhanced production and delivery process: VMI ensures the suppliers that they will have required materials and components on hand to deliver to the customers. This can help suppliers improve their production and delivery process and boost customer satisfaction.
How to choose a dedicated vendor management inventory service provider?
- Experienced VMI providers: It is important to access the track record of the service provider. The expert service provider will deeply understand the market and the demand of the products of the clients. They need to have a strong supply chains so they can respond in times of market volatility or unforeseen demand.
- Customized VMI service: It is important that the service provider customizes the VMI service as per the needs and requirements of the business. They will start by gaining deep inputs of the organization and conduct a walkthrough of the warehouses and plants. They will get inputs of all the significant details and implement the VMI program accordingly.
- Futuristic view: The dedicated VMI partner needs to have a vision for future. Great inventory management partners are always on their toes and seek ways to improve the program and provide data to help make smart decisions. They are abreast with the latest market trends, ongoing business analysis, data-driven recommendations for improvements and inventory and consumption patterns.
VMI is a robust tool that has proven to be successful across various industries. It allows the suppliers to manage their customer inventory levels that can lead to minimized inventory carrying costs, improved order fulfillment times and increased sales.