Keep Your Business Ahead of a Changing World

| Vaughn Fetkenhour

man looking at inventory on shelves

How Vendor Managed Inventory Can be Your Solution

Supply chain issues have been affecting businesses from the automobile industry to aerospace and everything in between. Since the start of the pandemic, the world has been in a constant state of trying to recover with the 900 largest companies in the U.S. and Europe averaging a loss of $184 million each due to supply chain issues. The biggest question that has been asked regarding this problem is “when will it end?” Although this is unclear, there are some preventative and progressive steps you can take to mitigate loss from supply chain issues.

Let’s look at VMIs.

What is a VMI?

two professionals shaking handsA VMI (Vendor Managed Inventory) is an agreement made between vendors and buyers where the vendor will manage, maintain, and elevate an inventory in the possession of a buyer. Breaking this agreement down into simpler terms, a buyer will no longer need to initiate a purchase order. Instead, the vendor will manage stock and order when it needs to be replenished. Data is shared between the buyer and vendor to find a pattern or system that works best for the two of them. A VMI is a living, adapting system that can be changed or kept to best suit the buyer.

Why choose a VMI?

A VMI keeps you ahead of the game. It allows you to have the products you need, when you need them, without any hassle of keeping inventory or ordering. This allows you to streamline your business and reduces the time and money devoted to managing inventory.

  • Greater ability to track and control spend
  • Reduced responsibility/increased employee efficiency
  • Shorter lead times/stabilization of supply chain
  • Decreased number of vendors
  • Decreased number of POs and invoices/administrative costs
  • Decreased stock outs/stock overages/waste
  • Reduced freight costs/expensive emergency orders
  • Proactively avoid obsolescence
  • Assurance that products will be available when required
  • Ability to reassign resources to boost productivity
  • Decreased planning and ordering costs

how vmi works chart

Bolded above is one of the most pertinent points to be made with the current state of the global supply chain is in. When you have products sitting on the floor that can’t get out because of a few small components, that’s new jobs that can’t be taken, employees with unwanted downtime, and money lost. Stay in front of an issue with a VMI and know you will have what you need when you need it. Save time, money, and stress.

Success through VMI

Establishing and maintaining a VMI is not a difficult process but there are a few key elements you will want to prioritize to get as much benefit as possible:

  • Clear definition of goals and understanding of each other’s business/capabilities
  • Effective information/business system
  • Turning data into useful information
  • A trusted partnership with a reliable flow of information

A VMI is a partnership that looks to streamline and simplify your business needs to the best of its ability. Don’t know where to start your VMI process? Contact us at Horizon Solutions today!