Have you lost sales due to inventory issues? Better yet, have you lost valuable time and energy dealing with and managing your inventory?
Inventory management is a genuine issue for many business owners, and it may be what makes or breaks the business as a whole.
A vendor managed inventory may be exactly what your business needs to save money and efficiently manage inventory.
Curious about how vendor managed inventory can help you and your business? This article covers the pros and cons you should know about.
What Is Vendor Managed Inventory?
According to The Network Effect, a vendor managed inventory (VMI) is a supply chain system that manages the inventory for your business, removing the need for you to manually initiate purchasing orders. Simply put, a VMI partner finds the most efficient way to manage your inventory to save you money.
Taking the guesswork out of managing stock levels oftentimes frees up time and money, allowing you to focus on more urgent needs within your business.
Partnering and working with multiple manufacturers often becomes complex and difficult to manage. A VMI partner can simplify this by managing your entire inventory.
Businesses with trouble keeping items in stock or consistently overstocking due to inaccurate sales forecasts will most likely benefit from entering into a VMI agreement.
How Does Vendor Managed Inventory Work?
Creating a symbiotic relationship between your business and the vendor, a VMI partner takes care of supply chain management and allows you to focus on the delivery date of products.
VMI partners keep an eye on consumer behavior and adjust stock sizes accordingly. Whether you are running a promotion and will need additional stock added or going through a slow season, a VMI partner will use forecasting models to manage and adjust stock sizes accordingly.
VMI partners have greater transparency into your business’s operations and your customers, which allows for better data and efficiency on operations. With this insight, you and the VMI will learn more about your business and purchasing trends.
This is beneficial for you and the customer alike since vendors can anticipate inventory needs and trends. This, when done correctly, will save you and your customer money.
Pros and Cons of Vendor Managed Inventory
- Eliminates extra steps in your distribution process
- Consistent inventory
- Savings in cost and productivity
- Better insight into inventory levels
- Removal of safety stock
- Reduced risk of stock-outs
- Reduced warehouse space and costs
- Lack of control on inventory data and physical inventory
- Vulnerability from data exposure – a level of trust is required
- Highly seasonal goods are not ideal for VMI
- Dealing with a smaller VMI who can’t deliver
Would Your Business Benefit?
While vendor managed inventory is exactly what some businesses need to thrive, it may not benefit others. Sufficiently weighing the pros and cons of a VMI and assessing your specific needs will be necessary to ensure a successful VMI experience.
If you are ready to shorten your supply chain and save money, contact us today. We would love to be your reliable vendor.