Leveraging Vendor Managed Inventory to Keep Business Booming: The Basics of VMI

Leveraging Vendor Managed Inventory to Keep Business Booming: The Basics of VMI

A common business model, Vendor Managed Inventory (VMI) has been around in various forms for many years and is utilized across many industries, from grocery chains and restaurants to department store retailers and manufacturing organizations as in the Aerospace and Defense Industry. At etaGLOBAL, we use VMI to fuel the success of our A&D clients. For the next several blog posts, we’ll dive into the details of VMI in a four-part series.

In this post, we will cover the basic definition and benefits of this effective replenishment strategy.

What Is VMI?

Just like the name states, VMI is inventory managed by the vendor or supplier. It eliminates the traditional ordering process. Instead, the supplier makes the stock replenishment decisions based on regular inventory analysis and sales data. VMI is beneficial for maintaining a lean supply chain and reducing inventory carrying costs.

By employing a VMI strategy, you can streamline many departments (such as logistics, procurement, demand planning) and you’ll strengthen the connection between supplier and buyer. Overall, the objective is to make the inventory replenishment process more efficient and economical.

Why Choose VMI for Your Company?

VMI helps you save money, save time and increase organizational efficiency.  Performance improvements using VMI include:

  • Increase in stock availability and a corresponding increase in sales revenue
  • Reduction in inventory levels and resulting savings in working capital
  • Greater supply chain transparency and improved supplier relationships
  • Faster inventory turns with reduced product obsolescence

The benefits of VMI for your company extend throughout the infrastructure of your organization. Many manufacturing businesses choose to go with VMI when they realize the vendor can streamline processes, relieving the burden of managing the inventory and freeing up resources to focus on more core business, revenue-generating activities.

The key for a successful VMI program lies in crystal clear communication and a thorough understanding from both the buyer and vendor how the supply chain will be impacted in the partnership.  Performance measures and controls should be set in place to protect both sides against exposure to risk and ensure costs remain stable.

When a VMI strategy is applied, the supplier-buyer relationship becomes a well-oiled machine where both parties come together to strengthen profitability and performance for each other.

etaGLOBAL Is Your Beacon in VMI Strategies and Implementation

If VMI seems like the route you’d like to take to expedite your inventory replenishment structure, connect with etaGLOBAL. As a leading supplier in the A&D industry, we have the tools and experience required to help you slash costs and stay competitive. Contact us today.