The Benefits of Vendor Managed Inventory

VMI or vendor managed inventory is hardly something new. However, it is still a strategy many merchants hesitate in adopting.

Sur-seal packaging will tell you that vendor-managed inventory can be very beneficial to your business. Before we talk of the benefits of VMI, its best to take a look at what vendor managed inventory actually is.

What is vendor managed inventory

Vendor managed inventory is when the customer’s inventory is managed by the supplier. This can be managed by making use of data from the customer or through physical counts. The customer’s stocks are replenished once the inventory reaches a reorder point.

The aim behind this exercise is to eliminate costs and increase efficiency. It has been noticed that vendors are more likely to manage inventory more effectively than their buyers. The basic aim of vendors is to cut down on stock outs and inventory that is obsolete. Now let us look at the benefits of VMI.

An improvement in customer experience

Vendor managed inventory strategy makes sure that the retailer that is selling goods to the customer has the correct amount of goods at hand. It is vital to understand that having the correct amount of merchandise isn’t only a financial benefit.

The technology that VMI requires is not significant, which makes it cost effective for the buyer.

Take the example of a customer who comes in to buy some innovative plumbing technology from your store that sells for hundreds of dollars. If there is no stock, not only will he not be able to buy the chosen article from your outlet, but in all probability, he won’t want to shop with you again.

There is more control

Vendors have more control because of VMI and can make accurate forecasts regarding future demands. Because of this, there is more efficiency in production. The customer can then resort to lean manufacturing and make deliveries that are more frequent, saving them money on storage space.

Through the practice of VMI there is a reduction in levels of stock and a decrease in shortage of goods. Also, vendors who use VMI will be fully aware of the inventory levels of their customers. This result in reduced inventory costs and errors and demands are better met.

Customer-vendor relationship gets strengthened

Through optimum service, suppliers are in a position to develop better relationships with their customers. With VMI, vendors will become important to suppliers. This will result in better strategic communication. Both parties benefit hugely with VMI.

Better planning

For the proper establishment of a good VMI relationship, the vendor must have right of entry to a significant quantity of data from customers. This includes POS and adjustments in inventory.

Forecasts in advance

Data is needed if an accurate forecast has to be made. The more the data, the more the information you can garner about seasonal trends and the life cycle of your product. Correct forecasts can be used as aids for long-term strategic planning and the fulfilment of short-term orders.

Sales costs see a reduction

There is a significant increase in the cost of your product because of storage. To store the inventory that is awaiting a sale, you incur costs. This significantly adds to the cost of the item under sale. VMI greatly cuts down on cost of storage.

All in all, it is obvious that VMI has huge benefits. Not only will you be able to focus on your business better, but will reap rich dividends too.

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