Enterprise-level inventory management is a constant juggling act. With regular cost fluctuations along the supply chain coupled with shifting consumer demand and behavior, even the most experienced businesses struggle to maintain optimal inventory levels on their own. Rather than keeping supply chain management in-house, many businesses are turning to vendor managed inventory (VMI) solutions to streamline procurement and optimize warehouse processes.
But how does VMI work, and what are its benefits? Read along with our beginner’s guide to all things VMI.
What Is Vendor Managed Inventory?
Under a vendor managed inventory contract, a product buyer entrusts the vendor to source, monitor, and maintain an agreed-upon inventory of various subcomponents. In other words, the upstream agent takes responsibility for the downstream agent’s inventory.
Sometimes referred to as a continuous replenishment program or supplier-assisted inventory replenishment, VMI is a process that enables supply chain optimization by:
- Adjusting the demand and supply gaps
- Lowering the inventory within the supply chain
- Reducing the likelihood that a business will unwittingly run out of stock
But, for this supply chain methodology to be as effective as possible, it requires the right technologies, mutually-beneficial objectives, and an emphasis on quality forecasting.
Benefits of VMI Inventory Management
Businesses that convert to a VMI model can streamline product procurement, assembly, and distribution. This, in turn, results in the following benefits:
- Demand smoothing – When the supplier controls the customer’s inventory, they can fine-tune stock levels in response to seasonality and customer demand. By smoothing demand variability, suppliers can better optimize lead times, stock levels, and replenishment.
- Cost savings – A supplier can achieve supply chain efficiencies that result in cost savings stemming from:
- Reduced safety stocks
- Lowered inventory levels
- Less frequent last-minute orders
- Shortened lead times
- Decreased disruptions from stock-outs
- Diminished need for warehouse space and resources
- Consolidated SKUs
- Time savings – By entrusting the VMI process to experts, you reduce administrative work and time spent on supply chain management. This creates economies of scale that frees you and your employees to focus on core competencies.
- Improved customer satisfaction – When stock levels remain at equilibrium and supplies arrive as expected, you reduce customer frustration caused by delayed shipments or a product being out of stock. Real-time communication between all parties not only decreases the likelihood of the bullwhip effect occurring along the supply chain, but also abates the impact if it does.
Our Inventory Management Services
Fastener Tool & Supply provides high-tech VMI solutions that are customizable to suit your operational needs. Our helpful services include, but are not limited to:
- AutoCrib – A high-tech asset management service, AutoCrib VMI software streamlines inventory transactions and gives you increased control over every item in your inventory, both large and small. It can help you reduce the usage of consumables and save time and money.
- Digital Bins – Our customizable inventory management system automates the distribution and supply chain management process. With real-time monitoring, auto-replenishment, and error-proof picking, digital bins increase your visibility and control over the entire supply chain.
- Proferred Vending – Want to reduce the usage of your warehouse consumables? Proferred vending systems are a cost-effective, turnkey solution tailored for industrial environments. Our state-of-the-art vending machines:
- Are available in either high-quality coil or locker styles
- Offer a simple PIN or card swipe login
- Come with year-round software support
- Can be wrapped or branded for increased visibility
These are just some of the services we can provide to enhance your VMI program. Other VMI solutions include kitting, assembly, just in time (JTT) solutions, 3PL and 4PL logistics services, custom packaging, and more.
Fastener Tool & Supply: Your VMI Solution
If you want to cut costs, mitigate risk, improve performance, and keep your customers satisfied, VMI is the answer.
But you can’t just trust anyone to handle such an important task. You need a vendor who you can trust and rely on—one who provides both the industry expertise and technology stack your business depends on to optimize supply chain activities.
Looking for the right partner?
At Fastener Tool & Supply, we have successfully delivered supply chain management solutions that drive efficiency and profitability for more than four decades. Contact us today to see how our VMI solutions can streamline your procurement, assembly, and distribution processes. Posted in FAQ, inventory managementEdit
