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Services 

Here are some benefits of vendor managed inventory:

1 Better relationships with suppliers

At its core, the goal of a vendor managed inventory system is to create a mutually beneficial partnership between the supplier and the customer. This relationship not only fosters healthy collaboration, but it smoothly (and accurately) controls the availability of goods, as well as the flow of inventory items throughout the entire supply chain.

2 Less need for safety stock

With VMI, the need for safety stock is greatly reduced, because the supplier is the one responsible for managing replenishment lead times. When the supplier notices a customer is close to exhausting its inventory levels, they can very quickly prepare for replenishing, given that suppliers have more authority over their production schedule and distribution processes.

3 Less upfront supply chain management 

When it comes to VMI system, the supplier assumes the role of inventory planning, and is similarly accountable for the customer’s inventory replenishment. For these reasons, the business itself has much less to do with the SCM, and instead trusts the manufacturer to meet all of their sourcing, reordering, and restocking needs.

Reduced purchasing costs

Because vendors collect inventory data rather than purchase orders, a lot less is spent on calculating and producing POs. What’s more, the need for PO corrections and reconciliation is also removed, reducing purchasing costs even further. In other words, when planning and ordering is shifted to the supplier, customers often encounter serious savings along the way.

4 Less inventory needed 

Clients who use VMI need significantly less stock at their warehouses, seeing as suppliers have a high degree of visibility of its goods (which prevents too much or too little inventory hanging around). In general, VMI’s philosophy is to keep inventory levels low and only place orders as needed, which can really lower costs in both the short and long-term.