Vendor Managed Inventory (VMI) changes the traditional roles of order processing from that of customer and vendor to supply chain partners. Each partner focuses on providing the best service they can to their customers.
In a vendor managed inventory plan, vendors are responsible for keeping the customer supplied. The customer keeps track of usage providing this information to the vendor so that shipments can be planned to prevent a shortage. When a vendor sees that their customer will run short of a part the vendor creates a purchase order. The customer simply approves the order then receives the delivery at the specified time.
Vendors are better able to deliver on time because they schedule the orders. Customers are better served and spend less time on the ordering process.
Acting as partners providing information up and down the supply chain strengthens the chain and everyone benefits.
Benefits To Vendors
- Better efficiency by improving scheduling:
- reducing time wasted on setup.
- reduced material costs by aggregating orders and buying in bulk.
- avoiding downtime, increasing return on investment.
- Greater customer satisfaction because of fewer errors, fewer shortages, and shorter delivery cycles.
- Less over time caused by rush orders.
Benefits To Customers
- Less downtime caused by shortages of supplies.
- Greater return on investment by reducing the inventory on hand.
- Reduced labor costs by streamlining the purchasing process.
- Less overtime for catching up from delays.
Avoiding shortages alone can save you thousands of dollars.
With a large variety of supplies and vendors from a wide geographic area, implementing VMI can be very complex.
The customer can focus on their usage and leave the task of maintaining
Each party focuses on the part of the process that they have