Inventory control is one of the biggest challenges for any company that manages a supply chain. Suppliers from numerous industries are seeing the advantages of switching to Vendor Managed Inventory (VMI).
Would VMI be advantageous for your company? Consider these three benefits:
1. Get more money in the door.
When a company starts using Vendor Managed Inventory, they see an increase in sales
almost immediately. Why is this? First, the company sees increased sales from customers already carrying their products because the customers experience fewer stock-outs. Secondly, VMI exposes the supplier to an increase in market share. Suppliers report an increase in the products carried by customers because the customer is seeing higher profits, lower costs, and better service. Lastly, utilizing VMI allows for collaborative planning on new product launches, sales promotions, and increased demand strategies. Suppliers are able to take advantage of special sales opportunities through this collaboration. Thus, they generate revenue they would not have received before.
2. Lower your overhead.
Many suppliers find that the savings associated with operating costs will offset the cost of implementing VMI. Suppliers save on administrative time because VMI reduces order problems caused by bad data, lowers emergency orders that result from poor customer ordering habits, and lowers the overall number of orders. A consistent order process where the supplier analyzes its customer order requirements can lower total orders by four to six percent. That's less time spent on all fronts, meaning savings can be found in the areas of warehouse staff, accounts receivable, invoice reconciliation, and transportation. Additionally, implementing VMI lowers strategic operating costs by lowering demand variability, providing better forecasts, and generating more accurate information for Operations Planning.
3. Build better customer relationships.
Implementing VMI will likely move your company to a "preferred supplier" status. As a result, you'll be protecting and growing your market share. Your customer will see that you provide bottom-line benefits. You are easy to work with because you reduce the cost, time, and effort required on their part. Your customers will view you more as a partner. Data provided by using VMI will enable you to talk with your customers about more than just products and costs. VMI empowers suppliers to pass on benefits and suggestions to their customers about streamlining their process as well.
It's easy to look at the bottom-line benefits of VMI – you will save money. However, VMI goes beyond that, offering other strategic benefits as well. Developing strong customer relationships is invaluable to the long-term success of any business. VMI helps accomplish both of these goals.
Contact us to find out more.
