16 Mar
Inventory can be a challenging component for many businesses and has an impact on the performance of eCommerce businesses particularly during peak seasons. Inventory that is either too little or too much could have a damaging impact on your business.
Having too little inventory would make it difficult to produce items and fulfill orders whereas, too much inventory increases the risk of damaged goods and takes up storage space. Vendor Managed Inventory (VMI) is your supply chain solution that helps to manage inventory-related risks.
What is Vendor Managed Inventory?
Vendor-managed inventory is a streamlined stock control and cash flow management system to improve order fulfillment and inventory management that benefits both suppliers and buyers.
Vendor-managed inventory is implemented for efficiency and to simplify the supply chain management process by placing the vendor in charge of the customer’s inventory. Vendor inventory management fosters deep strategic connections between vendors and their clients.
The purpose of vendor-managed inventory is to optimize the availability of the products and space by ordering the products when required.
How does Vendor Managed Inventory Work?
Vendor-managed inventory works by building a relationship between the parties (the vendor and the buyer) involved in a contract, allowing them to share risk and collaborate.
The vendor can monitor and manage the complete supply chain by taking care of a buyer’s inventory and supply chain management. Controlling all aspects of the supply chain, such as material procurement, market trends, shipping process management, and delivery is part of the vendor-managed inventory process.
The ability of vendor managed inventory to function properly depends on the parties’ ability to trust one another. Therefore, establishing a strong relationship and regular communication between the vendor and the buyer is vital to ensure smooth and seamless operations.
Vendor managed inventory relies on accurate inventory information therefore, it’s critical that the buyer communicate the data with the vendor. If one party does not have an adequate stock management system to provide the data – or is reluctant to share these details – vendor managed inventory will not work. Investing in a good inventory management software will allow for digital sharing of real-time data.
Advantages of Vendor Managed Inventory:
1. Inventory to meet with Consumer Demand:
The vendor manages replenishment in a vendor inventory management arrangement, allowing the provider to continuously modify stocks in response to customer demand. Vendor managed inventory boosts the supply chain’s overall responsiveness to seasonal changes, special discounts, and new initiatives.
Vendor can better coordinate manufacturer lead times by smoothing out the impacts of demand unpredictability. As a result, suppliers may keep a smaller inventory of finished items on hand. As a result, carrying costs are lower, and stock-outs and other inefficiencies cause fewer interruptions.
2. Processes that are more Efficient and Cost-effective:
The supplier can generate considerable efficiency in a vendor managed inventory partnership since the provider controls the customer’s inventory. The ordering process is usually based on more precise and up-to-date data, allowing for cost reduction.
3. Easier Forecasting:
The vendor managed inventory solution analysis the supplier’s data insights of the overall organization to provide greater understanding of actual demand.
When a supplier has a complete, real-time picture of their customer’s inventory needs, they can make highly accurate forecasts and develop processes that make deliveries seamless.
5. Increases Sales:
Through its vendor-managed inventory process, the supplier gains a better grasp of actual consumer demand, therefore being able to generate more sales. The supplier can better adapt to its customers’ conditions and future goals by fostering greater openness and communication, allowing both customers and suppliers to grow in more efficient and predictable ways.
Conclusion:
Vendor-managed inventory systems boost the supply chain’s overall responsiveness to seasonal changes, special discounts, and new initiatives. We presently provide and manage vendor-managed inventory daily at Meteor Space, allowing for a collaborative strategy between buyers and suppliers, maximizing product availability at a reasonable cost for our valued clients.
Vendor-managed inventory might be a great alternative for companies looking for a cost-effective inventory management system. If you’d like to learn more about VMI and how Meteor Space may benefit your company, please contact us.
