What is a Vendor Managed Inventory System?

ExecutiveChronicles | What is a Vendor Managed Inventory System? | A vendor managed inventory (VMI) system is a very useful tool in your business arsenal and something that can be incredibly powerful when used properly. However, it has to be handled well to get the best possible benefits from switching to one.

But what is a VMI system, and what makes it so useful compared to a standard supply chain?

What is VMI?

A VMI system is exactly what the name suggests: it puts the management of a business’s inventory in the hands of its supplier rather than the business itself. As an alternate supply chain method, this can be an effective way of simplifying and refining your supply chain as a whole.

A good VMI arrangement is about making your supply system a lot easier to handle, putting most of the workload into the supplier’s hands, and letting them make dynamic adjustments to what you are given. This can sound strange at first, but it has multiple major advantages over a normal supply method.

Rapid Adjustments

Being supplied through a VMI supply chain means that your suppliers can adjust what they send you, usually according to the data that you are sending them. This creates a personal relationship where they can adjust certain stock amounts depending on how well they are selling and how high their demand is.

These regular adjustments might seem unusual to a conventional company, but they can make a huge difference to smaller coÏmpanies or companies with a lot of varied stock. This can free up staff that would otherwise be arranging deliveries, and might even help your own company’s performance in the long term.

Data

Data-driven decisions are the lifeblood of any company and having more data available always helps. This can make your business far more competitive and versatile in the short term, but it gives you a much deeper understanding of long-term trends and changes in your market.

Since you are working closely with a supply company, you can get access to data that you might not normally know, such as supply-related trends or the popularity of specific products. All of this can combine into a much greater level of business sense and might open up more interesting business opportunities.

Streamlining

A streamlined supply system can make a massive difference, and using a VMI supply chain means that you can dramatically speed up the entire process. Reducing the complexity of your supply chain leads to a lot of smaller benefits, all of which can quickly stack up.

This means reduced delivery times, more control over the supply chain as a whole, a better understanding of each ‘link’ in the chain, and various other core benefits. Even a slight simplification can massively speed up how quickly emergency deliveries will arrive.

Consider using a VMI supply chain if you are having issues with a regular supply chain system at your business. It only takes a little bit of effort to switch over, but the benefits can be worth it, and it does not actually take much time to adapt to the new system.

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