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Consider Vendor Managed Inventory for Your Business

How Vendor Managed Inventory (VMI) can help to reduce labor, errors and cost.

Little things mean a lot--one of your biggest headaches can be keeping small items like fasteners in stock without holding excessive amounts of inventory. Some companies are finding that a vendor can take over so you can focus on bigger things. The right vendor managed inventory (VMI) program can increase supply chain efficiency and support your goal of a smooth production flow. With VMI, a supplier assumes responsibility for inventory and supply of a class of parts, guaranteeing availability, organization and replenishment, as well as procurement and invoicing. What you want is the ability to connect your parts-inventory needs to the global supply base, to have the right parts in the right quantity at the right time at the most competitive cost.

To provide the service you need in your operation, the right VMI partner should be able to assess and understand your current process in detail and have the capability to provide the right support. In some industries, for example, it is important for the supplier to understand specialized inspection, certification, and tracking and traceability requirements. With the assessment, the partner should give you a plan for moving your inventory and migrating inventory control systems, and explain how it will affect the way employees do their jobs. It should be clear who would be responsible for training workers on the new system. The VMI partner should be capable of changing over the system without interrupting operations, and have a reputation of being proactive about potential problems, both in the transition and in daily operations.

One of the tools the vendor can bring to the party is automated communications and reporting. Applying technology to track part movement, stock levels, replenishment lead-time and order points produces several benefits. With the elimination of manual data entry, errors are reduced. Automated inventory control linked to your demand-planning data or electronic Kanban board will speed up replenishment, order cycle time and lead-time. The purpose of VMI is to eliminate stock-outs that hold up production, and the expediting that follows. A good VMI system should also reduce the number of purchase orders your employees have to generate and handle, and the labor hours associated with them.

Another common feature of a VMI service is the "in-plant store" managed by the vendor on your site. Point-of-use replenishment can also be provided by the VMI partner, where inventory is maintained as close as possible to where it is needed. Giving the partner responsibility for line-side delivery simplifies your material handling and inventory processes, reducing error and stock-outs.

In a good VMI arrangement, the relationship with the partner is crucial. The vendor must be able to communicate well with your employees, be well organized, open to audit and have a proven track record with companies like yours.


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