Why would a company want to be involved in a Vendor Managed Inventory program?


  • Data entry errors are greatly reduced due to computer to computer communications. The speed of the processing is also improved.
  • Both parties are interested in giving better service levels to the end customer. Having the correct item in stock when the end customer needs it, benefits all parties involved.
  • A true partnership is formed between the Manufacturer and the Distributor. They work closer together and strengthen their ties. This benefits of a stronger partnership goes beyond VMI.
  • Stabilize the timing of Purchase Orders – PO’s are now generated on a predefined basis. Example: A once/twice Weekly purchase order cycle.

Anb00009.wmf (16048 bytes)DISTRIBUTORS BENEFITS:

  • The goal is to have an improvement in Fill Rates from the manufacturer and to the end customer. Also, a decrease in stockouts and a decrease in overall inventory levels.
  • Planning and ordering cost will decrease due to the responsibility being shifted to the Manufacturer.
  • The overall service level is improved by having the right product at the right time.
  • The manufacturer is more focused than ever in providing great service to the distributor and the end customer.

Anb00010.wmf (10402 bytes)MANUFACTURERS BENEFITS:

  • Visibility to the Distributors Point of Sale data makes forecasting for the manufacturer easier.
  • Promotions can be more easily incorporated into the inventory plan.
  • A reduction in Distributor returns due to improved ordering.
  • Visibility to Stock Levels helps to identify priorities – replenishing for stock or a stockout?. Before Vendor Managed Inventory, a manufacturer has no visibility to the quantity and the products that are ordered. With VMI, the manufacturer can see the potential need for an item before the item is ordered.

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