By Ellen Campbell-Kaminski, former Vice President of Marketing, Datalliance
Companies find all kinds of benefits with their vendor managed inventory (VMI) programs. There are material, tangible, and quantifiable benefits such as transportation savings, reduced order touches, sales increases as well as improvements in turns and out-of-stocks. In a true win-win situation, both the manufacturer and their distributor or retailer trading partner, realize impressive benefits. The Resources section of this site contains numerous case studies demonstrating the quantifiable value when an advanced VMI system from Datalliance is in place, including the Two Year Study. But they also enjoy significant intangible benefits that are more difficult to quantify but no less real.
Every year, we survey our customers and their trading partners in preparation for our Datalliance Forum - the world's largest annual cross-industry gathering focused entirely on the topic of vendor managed inventory (VMI) and related collaborative replenishment processes, In the survey, we ask suppliers why they started their VMI programs. The top two (2) reasons, tied at 34 percent, were to "Satisfy Key Customers" and to "Be a Better Partner." Other reasons included: "A Way to Differentiate from the Competition (eight percent);" "A Way to Increase Sales (eight percent);" "A way to Keep up with the Competition;" and "A Way to Reduce Stock-outs;" both at two percent. Other responses included: "All of the Above" and "Reduce Inventory Across the Supply Chain."
There was an interesting shift with the follow-up question: "Why does your company continue to participate in VMI?" Now there was a clear first choice with 40 percent of the respondents saying their company continues to participate in VMI because it enables "Better Relationships." Twenty-five percent of respondents indicated they continue their VMI programs to "Satisfy Key Customer(s)."
So, they entered into a VMI program for one reason and continue to stay because VMI makes for a slightly different reason, namely, VMI programs foster collaboration between trading partners. In order for VMI programs to work successfully, trading partners need to establish mutually agreed upon objectives and thresholds. Additionally, Datalliance recommends quarterly business reviews between trading partners.
No surprises when we asked respondents to rank the benefits their company realizes from their VMI program. The top two benefits are "Be a Better Partner" and "Satisfy Key Customer(s)" followed by "Increasing Sales," and "Reducing Cost of Order Management."
When a VMI program is operating well and the supplier is viewed as a better partner attentive to a key customer's needs, there is a natural increase in sales. It just makes sense and the customer survey supports that.
About the Author
Ellen Campbell-Kaminski is the former Vice President of Marketing at Datalliance. She is an accomplished B2B marketer over 20 years in marketing leadership and general management positions at global information services and technology companies. You can follow Ellen on Twitter @campbellkam and LinkedIn at linkedin.com/in/ellenkaminski