Vendor Managed Inventory

In the modern day, when large corporations have taken over the businesses and almost nothing is being produced locally. Everything is being imported from foreign countries with established manufacturing industry and lower labor costs, the only difference that defines the success or failure of a company is its supply chain strategy. One such technique that can help an organization form an efficient supply chain strategy is vendor managed inventory.

What is Vendor Managed Inventory?

Vendor Managed Inventory as discussed earlier is a technique in supply chain strategy when a supplier of goods, which is usually the original equipment manufacturer or the OEM, handles the inventory and is responsible for optimizing it for one of their distributor. It helps businesses streamline their supply chain at every single step and not only helps them improve processes but also their financial performance. A successful VMI setup involves having close relationships with both the vendor i.e. supplier of the goods and the customer.

The Need for Vendor Managed Inventory

On top of some of the benefits that we have already discussed following are the main factors that make it necessary for many distributors to choose the vendor managed inventory model for their supply chain strategy.

Improved Alignment of Inventory with Customer Demand

Having a VMI means that the vendor or supplier is in charge of the replenishments of your inventory. This means that you’ll never have to worry if you are running low on a certain product or a product has been sitting in the warehouse for too long. Because in this case, the supplier or vendor has information about your real time demand and only supplies more product if there is an increase in demand. This not only aligns the inventory with customer demands but also saves you a lot of money that might have been wasted on damaged or excessive inventory otherwise.

Streamlining of Processes and Lower Costs

When the supplier is directly on top of the inventory and its replenishment, the only task you have to worry about is selling the product. Everyone doing their job at the right time makes the whole process streamlined and cuts additional costs such as costly last-minute orders, reduced returns due to product replacement and overall reducing the number of orders.

Focus on Sales

When all the processes are streamlined, you as a distributor can focus on your part of the problem, which is trying to push the product in the market. In the absence of vendor managed inventory, countless man-hours and hundreds of dollars would have been spent in managing the inventory, thus taking the focus of top management off of the actual goals of the organization. This way sales managers can focus on the customers only and try to increase their sale numbers.

Better Customer Relationship

Studies have shown that businesses with vendor managed inventory have a larger more satisfied customer base as there are no unusual delays in deliveries, the products never run out of stock and in case of any cancellation or returns, the issues are sorted out quickly as the supplier itself is directly involved in the matter.

On top of these benefits, a vendor managed inventory just overall makes the supply chain management of a company more efficient and result oriented. We at thrive technologies help companies dive into this new field and reap the full benefits of a vendor managed inventory with our automated and best in class vendor managed inventory software.