Inventory management is one of the most time-consuming yet crucial tasks for many business owners. Striking that delicate balance between overstocking and going out of stock usually feels like a challenge that just never ends. This is why many brands and businesses rely on vendor management inventory to streamline and automate this process for them.
Vendor management inventory ensures that business owners can keep track of their stock without having to constantly check and reorder, so they can allocate their time and resources to other aspects of the business.
In this article, we’ll delve deeper into what Vendor Management Inventory is and how it can help businesses grow.
What is Vendor Management Inventory?
VMI is an inventory management approach where a supplier or manufacturer (the inventory seller) manages and maintains the inventory, even after the inventory is in the retailer’s warehouse. The supplier takes all inventory-related decisions and replenishes inventory levels for the retailer.
With this approach, the vendor is responsible for mitigating the retailer’s inventory stockout and overstocking risks. They do this by working with a company that offers inventory management services, like us at Vareya, that allows them to set stock thresholds, monitor inventory levels, and maintain these levels at a targeted level.
How VMI Benefits Your Business
VMI streamlines most parts of inventory management, which can help save time, reduce costs, and improve the experience of the customer. The supplier takes almost if not all responsibility for managing and tracking the inventory levels, which allows more focus on the core business activities.
VMI replenishment apps can monitor the stock usage and improve inventory levels, which lessens the risk of overstocking and running out of stock. This will then reduce costs for carrying and increase efficiency.
VMI helps maximize visibility into inventory at the point-of-use (on manufacturing lines or in stockrooms), which enables both the buyer and supplier to make decisions that are more well-informed. This will then lead to bigger profits for both parties in the long run.
How Does Vendor Management Inventory Work?
The vendor ships the materials to a desired location scheduled by the manufacturer which is nearby the assembly spot.
A third-party logistics company will provide assistance with the management of the materials, which are still the vendor’s.
The vendor and the manufacturer will then let each other in on the details of the inventory stock and the on-going strat for replenish, so the manufacturer could finish the payment once they use the materials.
Steps to Implement VMI in Your Business
The start of a program for vendor management can be examined into four distinct steps, aiding you in managing, analyzing and perfecting your processes:
- Create business goals and imagine what you are expecting to reach through each of the vendors. In order to survey performance and have an image of where you require improvement or change, it’s essential to have clear performance requirements that you could compare.
- Select the right vendors. A vendor management program needs to have a procedure in place that lets you carefully pick the best vendors. Each vendor is going to have pros and cons, and you must find the one that will work best with your company. The wrong vendor will result in lost time, inefficient operations and wasted money.
- Managing your vendors is crucial. It’s important that your organization checks and examines performance, making sure vendors are reaching their agreed output and performance levels and that they’re meeting their contract requirements. This will maintain ROI.
- Hit your objectives to grow. The last step when it comes to vendor management is to always move the goalposts. Want your business to achieve new heights? Then you must continually redefine your objectives and goals to ensure that your chosen vendors are assisting you in consistently hitting them. If they no longer do, maybe you’ve outgrown that specific vendor and it’s time to move on.
Is VMI Right for Your Business?
While VMI offers plenty of pros, it’s important to determine if it’s a good fit for your business. Start by asking yourself these questions:
- Are you frequently dealing with running out of stock or overstock?
- Do you have a trusted vendor who can handle this responsibility?
- Are you open to sharing inventory data for better collaboration?
If the answer to these questions is yes, VMI might just be the inventory solution you’ve been looking for.
Vendor Management Inventory is more than just a system—it’s a smarter way to manage your stock. By joining hands with your supplier, you could improve customer experience, reduce inefficiencies, and free up time for what matters most which is growing your business. If you’re ready to take the stress out of inventory