bisco industries Blog

3 Reasons Why You Should be Using Vendor Managed Inventory (VMI)

What is Vendor Managed Inventory (VMI)?

VMI is a customizable solution that contracts out management of a company’s inventory for an item or group of items to a supplier. Companies provide suppliers access to all pertinent information such as demand forecasts, required inventory levels, and shipment schedules. Based on this this shared information the supplier then assumes responsibility for maintaining inventory and ensuring all demand requirements are met.  VMI offers several benefits to users including:

  1. VMI Minimizes the Risk of Shortages

One of the primary advantages of VMI is ensuring that parts are available when demand arises. Suppliers can work directly with component manufacturers to manage lead times and maintain adequate inventory to meet forecasted and even unanticipated demand. This in turn reduces production shortages allowing the client to meet delivery schedules on time.

  1. VMI Reduces Inventory Management Costs

By choosing to use VMI, businesses can not only minimize the risk of having a line down but also reduce inventory management costs. This is because VMI allows the parties involved to focus on their core competencies (what they do best). For example, a toy manufacturer can concentrate on producing their toys more efficiently without spending valuable time managing inventory.  At same time the VMI provider can concentrate on ensuring all components are available for the next production run of toys.  The result is cost savings through increased efficiencies.

  1. VMI Means Increased Revenue

In many cases end customers see the benefits of Vendor Managed Inventory (VMI) in the form of consistent on-time delivery, fewer quality defects, and even reduced costs. The bottom line result is increased customer satisfaction leading to future revenue growth.

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