VMI: Power in the Background

Vendor Managed Inventory

Sure, you've heard of it.

Vendor Managed Inventory (VMI) has been heralded in many industries, including automotive, consumer products, retail, and more recently healthcare and pharmaceuticals. However, the use of this tool spans wider than just those industries and there are a multitude of applications based on specific industry needs. For example, most companies that use the IntelliTrans Global VMI solution primarily produce or consume chemicals, plastics, and oil & gas products. Regardless of the industry, successfully implementing VMI will require senior management "buy-in", collaborative mindsets and trust, great technology, and the ability to rethink the traditional ordering process. Without these essentials VMI initiatives often fail. If those basic building blocks are in place, you are set to reap the rewards: improved inventory turns, service, and sales.

Although there are a multitude of applications for VMI, supplier managed inventory, continuous replenishment, CPFR, or whatever you choose to name it that day, the principles remain the same; electronically send demand information to suppliers and let them generate replenishment orders based on that demand and mutually agreed upon objectives for inventory levels, fill rates, and transaction costs. Sounds easy, right?  Not exactly. VMI needs can vary even across your own supply chains, so it’s essential that you consult VMI experts with supply chain expertise specific to your business.

A VMI solution should be tailored to meet your needs.  If you have a short lead time supply chain with relatively simple replenishment logistics, then your solution should allow you to set high, re-order, and safety stock inventory levels, obtain readings multiple times per day, and allow alerts sent to the customer service team to drive order fulfillment.  This will ensure the customer always has enough product, while the supplier always has enough lead time to fill the order using the desired mode & transport carrier.

Consider too the lifecycle of VMI solutions.  Providers of reliable solutions will seek a long-term relationship, offering service that includes a hardware warranty for the LIFETIME of your agreement. 

Look for automation that goes beyond measurement.  Game changing VMI will have the capacity to integrate electronic order creation and send replenishment orders directly from the VMI system to your ERP system.  Such solutions will exchange the necessary purchase order information to create the transaction, and then monitor quantities delivered against that purchase order.

Have a longer lead time in your supply chain?  Integrated Collaborative Planning, Forecasting, and Replenishment (CPFR) solutions integrate a demand forecast, silo inventory, and in-transit inventory tracking to provide a forward-looking replenishment plan.  This allows the creation of orders with enough lead time to use the preferred mode of transport (i.e., rail) and carrier instead of having to rush orders in higher-cost modes.

What all this means is that the supplier has a lower cost-to-serve their customers, the inventory at the site is maintained at a lower level than before, and the relationship between supplier & customer evolves from transactional to strategic.

IntelliTrans provides a unified and proactive way to integrate shipping and inventory needs across all modes of transportation, especially rail, truck and intermodal.  Our world-class GVMI solutions leverage sensor technology and six sigma data analysis to help customers lower cost and maximize efficiency in their supply chain, and meets all of the aforementioned requirements, from availability of Supply Chain experts to an integrated CPFR solution.  Contact us to learn more about how we can help you do the same.

Further Reading & References