Benefits of Vendor Managed Inventory
The Benefits of VMI are numerous for both Manufacturer & Distributor. Here is a partial Listing:
- Data entry errors are reduced due to computer to computer communications. Speed of the processing is also improved.
- Both parties are interested in giving better service to the end customer. Having the correct item in stock when the end customer needs it, benefits all parties involved.
- A true partnership is formed between the Manufacturer and the Distributor. They work closer together and strengthen their ties.
- Stabilize the timing of Purchase Orders - PO's are now generated on a predefined basis.
- The goal is to have an improvement in Fill Rates from the manufacturer and to the end customer. Also, a decrease in stock-outs and a decrease in inventory levels.
- Planning and ordering cost will decrease due to the responsibility being shifted to the Manufacturer.
- The overall service level is improved by having the right product at the right time.
- The manufacturer is more focused than ever on providing great service.
- Visibility of the Distributor’s Point of Sale data makes forecasting easier.
- Promotions can be more easily incorporated into the inventory plan.
- A reduction in Distributor ordering errors (which in the past would probably lead to a return)
- Visibility of Stock Levels helps to identify priorities (replenishing for stock or a stock-out?). Before VMI, a manufacturer has no visibility of the quantity and the products that are ordered. With VMI, the manufacturer can see the potential need for an item before the item is ordered.
Back to About VMI