"It goes without saying that trust must be the foundation of any collaborative planning initiative." Stephen Hochman & Kevin Reale AMR Research "Vendor-Managed Inventory - Truck Parts Supplier SKF Peels Out with SaaS" November 30, 2006

"We have been able to seamlessly integrate Datalliance (VMI) to serve as our global inventory replenishment system in just over a year's time. .. their expertise and ability to scale quickly has been tremendous." Dan Ludwikoski Manager of Supply Chain Process Improvement Rockwell Automation

Although the basic concept of VMI is straightforward, successful deployment is not necessarily easy. There are several keys to success:

Recognize that VMI is Not for Everyone:

First, companies should recognize that VMI is not for everyone:

• Suppliers and customers should only consider VMI for trading partners that are important to them (e.g. reasonably high sales/usage volume or growth potential)
• Suppliers and customers can only do VMI with trading partners that have reasonably solid basic operational capabilities (i.e. consistent warehouse procedures and the ability to provide good data)

Understand That VMI is Collaborative

Second, VMI is different from a typical in-house information system or business process improvement effort in that neither the supplier nor the customer can do it alone - they must work together to make it happen.

• Both companies must have mutual trust, a fundamentally good working relationship, and an environment that fosters collaboration.

Don't Underestimate the Importance of the VMI Operations Platform

Third, VMI requires a technology and operations platform that is:

• Designed around a deep understanding of inventory and supply chain management
• More than just performing the right calculations…
• Designed with a solid understanding of issues like varying demand patterns, different supply chain structures (e.g. hub & spoke vs. direct store delivery), multi-location shipping & delivery, and many others.
• Built to facilitate consistent, effective communication between the customer and supplier
• Provides common information to both parties so the process is transparent (e.g. inventory turns and in-stock percentages)
• Provides valid information so people will trust it (e.g. built-in processes to ensure data quality)
• Exception-oriented so people can focus their efforts where action is needed instead of wading through data (e.g.: highlight unusual demand, suggested transfers, and items not sold)
• Managed to ensure reliable operation day-in and day-out.
• A data center with high availability using techniques such as redundancy, fail-over, 24x7 management
• Communications management that monitors for expected transmissions, automates re-tries, and alerts when down
• Skilled people ready to quickly resolve problems (e.g. transmission, data format)

Leverage VMI Experience

Finally, trading partners committed to the success of VMI should look for a source of experienced guidance and support, along with well-conceived implementation tools and processes.

• People who have implemented VMI and use it regularly
• Project plans and tools that take the guesswork out of start-up
• Organizations committed to continually improving the process
• Professionals ready to provide support when things change, and help whenever it is needed

Common Concerns and Answers >