Below are some common concerns customers (e.g. distributor, retailer, OEM, or product end user) often have about entering into a Vendor Managed Inventory relationship with a supplier and how a good Vendor Managed Inventory solution addresses those concerns.
Will I lose control of my inventory?
No. A good VMI solution will provide:
- Continuous access to information, allowing regular monitoring of inventory details and measurement against objectives
- Reports and exception alerts that ensure any potential problems are recognized early so they can be collaboratively addressed and avoided
Will the supplier try to take advantage of us or put their goals above ours?
No. A good VMI solution will be based on:
- Mutually agreed objectives, shared information, and continuous reporting that make the process highly transparent
Note that suppliers who enter into VMI recognize the need to maintain a high level of trust with their customers - a transparent system makes it clear to both parties if performance criteria is not being met.
Mutual benefits of VMI include optimization of inventory turns and earns, inventory transparency, inventory demand forecasting, reduction of dead and slow moving stock, and improved customer service and stock fill rate performance for our customers. This all adds up to increased stock sales growth rates plus improved asset management and cash flow for both parties.
Jim Vanden Hoek VP of Channel Management and Development, Siemens
The VMI process works and delivers results. Our results are very impressive, as we have increased turns 34%, reduced inventory 28% and improved customer service 9%. We have also reduced our branch transfers by about 80%. This is a major cost savings for us and verifies that VMI is getting the right products, to the right locations, to satisfy end customer demand.
Mike Betts President, Betts Truck Parts & Service
Our suppliers know their products better than we will ever know them. VMI helps us to work more collaboratively on how to best sell, stock, position, and promote their individual products. Before using VMI, we did not have the time or the information to do this kind of analysis. We now work with our suppliers to build a stocking plan to maximize sales and launch new products into the marketplace.
Joe Hart Director of Purchasing and Material Management, KirbyRisk
Will the supplier's system really handle my needs?
Yes - if they have the right VMI solution. A good VMI solution will be:
- Designed by VMI specialists
- Delivered and managed by professionals with many years of VMI experience
- Used every day at hundreds or even thousands of locations
- Refined over time to handle just about any customer environment effectively and efficiently
Will the supplier's system be reliable?
Yes - if they have the right VMI solution. Reliability is a key requirement for successful VMI. A good VMI solution will be managed around the clock, with data center operations that include:
- High availability features such as: redundancy, fail-over, 24x7 systems management, and environmental considerations
- Technical and VMI specialists ready to address any problem that may arise
- Reliability metrics measured on a daily basis
- A well-documented disaster recovery plan that is tested regularly
Will VMI be expensive for us?
No. With most VMI solutions:
- The supplier covers the cost of the service itself, so there is typically no on-going cost to the customer
- Some customers will have a one-time cost to configure their business system to exchange information with the VMI solution
- Depending on the method selected by the customer, there may or may not be a data transmission cost
Our business system is difficult to work with - will it be able to share the information required for VMI?
Almost certainly. Your system just needs to be able to regularly create a product activity report. A good VMI solution will have:
- The flexibility to handle a wide variety of data formats and communication methodologies
- Existing examples of integration with different packaged and in-house developed business systems on a variety of computing platforms
- Implementers who will work with your software provider or IT personnel to identify the best way to create the required data flow between VMI and your particular business system
Will sensitive information like sales, usage, or inventory figures be kept confidential?
Yes. Information like demand and inventory is required for effective VMI, but detail information about the end customer (e.g. sales price, address) is not. A good VMI solution provider will:
- Be committed to keeping customer information confidential
- Have a number of protections built into the service for that purpose