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Vendor Managed Inventory (VMI) Overview

Some VMI benefits

  • Shorter lead times - Sharing information means knowing what your customers need in advance, allowing you to plan accordingly and deliver promptly
  • Reduced inventory
    • Having a future view into customer needs allows you adequate time to plan for what is needed and move towards a just in time business model
    • Reduce obsolescence - less likelihood of holding on to excess stock that could become obsolete
    • Less inventory, less money tied up in the warehouse
  • Increased sales
    • Having the ability to offer VMI to potential customers is a huge benefit and service offering
    • Companies offering VMI are better able to manage their ordering and customer delivery, and increasing service levels
    • Being able to offer shorter lead times and timely delivery help you stand apart from your competitors
    • The system/software becomes a sales tool. It shows customers what you can do and provides proof that you manage an efficient business
    • Some clients may insist on VMI
  • More leveraged relationship for the supplier. Customers are less likely to look elsewhere because your service is exemplary

In choosing a VMI system, there are a few pitfalls to watch for

  • Expect your customers to provide data over a variety of mediums (FTP, email, EDI VANS, internet, etc.) and in varying formats (ASCII, Excel, EDI, XML, etc.). No two customers are likely to have the same transmission capabilities and convincing a customer to send you data exactly as you want it is a rare occurrence.
  • Look for an extremely user-friendly system that is intuitive and requires little to no technical maintenance from users and IT staff alike. Many attempts at VMI fail because the software is too cumbersome and there are too many manual processes required by the users.
  • Find a system that can add new VMI clients quickly and efficiently. Once sales has convinced a client to sign up and/or go the VMI route, if it takes too long to start, momentum is lost and the process may fail if too much time passes.
  • A VMI system should include a demand planning engine, not just software that takes in data and provides reports. Some clients will need you to create forecasts, consider lot sizes, order minimums, lead times, safety stock, safety time, frequency of shipments, and a variety of other demand planning tasks. It is not enough to simply monitor inventory.
  • The software needs to be a manage-by-exception system with full reporting capabilities included. When you have thousands of SKUs, you need a system that points out the ones that need attention and filters out the ones that do not.

How SCP 4.0 can help your business VMI needs

  • Our SCP 4.0 product can process electronic information in virtually any format (Excel files, ASCII, EDI, XML, exported reports, and more) and also automates the receipt of this information to a great degree. Initial setup of the system takes approximately 2 weeks and after that new clients can be added in a matter of a few days. It is a full demand planning and forecasting package that provides automation at such levels that it can actually communicate with users, clients, management, IT, etc., by email and other means.
  • Note that a single site license of SCP 4.0 (no restriction on the number of users) will handle an unlimited number of VMI relationships, and is also capable of managing your internal inventory planning and replenishment requirements as well. If you feel there are opportunities in inventory reduction and service level improvements, this product will address almost all your inventory management needs.
  • We have plenty of references standing by. When you are ready to speak with someone, just let us know and we will put you in touch with some of our clients.
  • We can provide a custom demo using your data. This will take about an hour and a half and can be done via GoToMeeting online. There is no cost and it is helpful when people see their own data and possible benefits to their business.