Vendor managed inventory is a method of inventory management wherein the inventory is managed and maintained by a vendor or supplier (the inventory seller) even after it has been placed in the warehouse of the retailer (the inventory buyer).
With the help of vendor managed inventory (VMI), suppliers can take charge of inventory control even in a retailer’s warehouse.
VMI increases supply chain efficiency, promotes cooperation, and increases predictability for both parties by coordinating vendor and retailer goals.
Key Benefits of Managed Inventory
More Streamlined Processes
Order management becomes solely reliant on one party when inventory management is outsourced to the suppliers. It is now the supplier’s responsibility to predict stockouts and provide new product batches, and retailers no longer have to spend time scheduling orders.
Less Necessity In Safety Stock
Safety stocks are typically used as a way to prevent stock-outs because retailers worry that suppliers won’t be able to promptly arrange delivery during periods of unexpectedly high demand. However, safety stock causes a specific quantity of money to “sleep” in the inventory in return for security. Since suppliers are managing the inventory in real-time, there is no need to guarantee a safe stock in the event of VMI. This implies that the new quantities are dispatched automatically before the stores’ stock runs out.
Increased Customer Satisfaction
For contemporary, time-pressed consumers, out-of-stock situations and lengthy lead times are a nightmare. Therefore, you run the danger of permanently losing a customer if you make them wait too long for their order. No stockouts in the retailer’s inventory are guaranteed by properly configured vendor-managed inventory. This implies that you won’t ever have to wait for your customers’ orders or, worse, inform them that they aren’t available. As a result, VMI’s delivery speed greatly raises customer satisfaction.
Reduced Responsibility
It’s difficult to strike a balance between overstocking and understocking. Because of this, the majority of retailers are more than willing to assign that burdensome job to outside parties. The selling company may concentrate on other, more strategic business facets thanks to VMI. Additionally, it significantly lessens the burden of constantly monitoring inventory levels and worrying about running out of goods. Therefore, one advantage of vendor-managed inventory for your business is less obligation.
Reduced Cost
Traditional inventory management comes with a number of costs that VMI does away with. First, businesses save money on labor costs that could be utilized for order management and inventory monitoring. Second, shops are not always required to maintain a secure inventory. Retailers can also save money because safety stock is essentially an investment.
How Vendor Managed Inventory Improves Cost Control
VMI assists in lowering inventory-related expenses linked to excess inventory by optimizing inventory levels. By managing inventory according to real demand, suppliers minimize the requirement for substantial safety reserves and the related storage expenses.
By transferring accountability from buyers to suppliers, Vendor Managed Inventory (VMI) provides a potent method of inventory management. Many firms find it to be a useful strategy because of its advantages, which include decreased holding costs and increased inventory accuracy.
Better Inventory, Lower Costs with VMI
Businesses can save money, maintain organization, and prevent stock issues by implementing Vendor Managed Inventory (VMI). Retailers may eliminate the need for safety stock, save time, and stop worrying about product shortages by letting suppliers handle inventory. Additionally, it assists companies in avoiding overstocking, which results in lower storage and unused item costs.
The store no longer has to worry about daily stock level checks thanks to VMI. Because suppliers handle everything in real-time, orders arrive at the right time—neither too early nor too late. As a result, there are fewer errors, more precise stock levels, and satisfied clients who consistently receive their orders on schedule.
Ultimately, suppliers handle keeping shelves stocked, while VMI assists retailers in concentrating on expanding their businesses. It’s a win-win approach that improves overall operations, lowers expenses, and gives better control.
