Distributors and Retailers typically participate in suppliers’ Vendor Managed Inventory (VMI) programs to work collaboratively with those suppliers to improve service levels and inventory performance while reducing the time and cost of inventory management. .
- Reduced Inventory (Increased Turns) One of the biggest opportunities for distributor/retailer savings from VMI is the reduced cost of carrying inventory. VMI helps increase turns by reducing the need for safety stock.
- Reduced Administrative Costs VMI fundamentally reduces the cost of purchasing administration for distributors and retailers.
- Fewer stock-outs or shortages VMI improves customer service rates (fill rates) due to fewer stock-outs. Primarily, VMI does this for the same reasons it reduces the need for safety stock.
Distributors and retailers usually have a number of questions and concerns when considering participation in a supplier’s Vendor Managed Inventory (VMI) program. Here are some common questions and how a good VMI solution addresses those concerns.
Common Distributor/Retailer Questions
- Will I lose control of my inventory? No. A good VMI solution will provide continuous access to information, with regular monitoring of inventory details and measurement against objectives.
- 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.
- Will the supplier's system really handle my needs? Yes - if they have the right VMI solution. A good VMI solution will be designed and supported by VMI specialists.