For years, suppliers have been contacting their biggest customers and asking them to join their supply chain management programs (e.g., vendor managed inventory). Now, we’re seeing distributors going to their suppliers and asking for VMI-like programs. Why are distributors now initiating these conversations?
For one, after years of participating in supply chain management programs with other suppliers, distributors have seen the positive results firsthand. They understand that higher turns, more sales, and fewer out-of-stocks, while maintaining pre-VMI inventory levels are possible. This has spurred distributors to identify other suppliers that could benefit from a VMI partnership.
Second, beyond the financial benefits, VMI frees distributor personnel from time-draining order management because VMI empowers suppliers to calculate orders. This is especially helpful for resource-strapped distributors as they can now focus on providing better customer service, answering more questions, and increasing order fulfillment.
And, the importance of fulfilling orders from authorized distributors is only increasing as contractors have more access to non-authorized resellers. Of course, non-authorized resellers can leave a very bad taste in the mouths of purchasers as suppliers, like Eaton, explicitly state that they do not warranty products from these sellers. By using VMI, the potential for marketplace confusion is reduced, protecting a supplier’s reputation and their future sales.
In addition, distributors understand that suppliers are busy organizations, and if they can expedite the VMI process, it becomes easier for suppliers to evaluate the potential of a VMI partnership. And, it displays a distributor’s commitment to not only VMI, but also the desire to collaborate with a supplier.
Speaking of distributors and suppliers collaborating, VMI has come a long way from its early days in consumer packaged goods. Now there are a multitude of options and capabilities available, which we call Advanced Collaborative Replenishment (ACR). And, because ACR is based in VMI, the same benefits of higher turns, more sales, and fewer out-of-stocks remain while providing additional flexibility.
If you are a supplier, and a distributor indicates a desire for VMI, it’s an excellent opportunity to explore. Suppliers unwilling to do so could be missing significant revenue or, even worse, lose business to a competitor that’s willing to participate.
For distributors interested in approaching a supplier about VMI or learning about advanced collaborative replenishment, please contact Tom Hoar (firstname.lastname@example.org).