You rush to the parts bin for a customer in need. Maybe you’re working on a tight manufacturing deadline. A worst-case scenario quickly unfolds: you’re completely out of a critical part.
Every business in the world has gone through these situations. It seems as if it’s impossible to keep up with inventory needs. There’s either too many or too few items for your customers.
Vendor managed inventory (VMI) is your technological answer to inventory troubles. However, it’s hard to know when your company is ready for such a system. Ask yourself these top four questions before investing in VMI. Being prepared on several levels is necessary for success.
1. Is Your Inventory Management Reactive Instead of Proactive?
This question applies to both large and small businesses. If you’re constantly filling emergency orders out for inventory, your company is reactive. This inventory strategy costs you both time and money.
VMI allows you to be proactive with inventory. Concrete numbers analyzed by your vendors tells them which items to replenish on the next shipment. You may be low on one product, and the numbers reflect this situation. VMI takes the purchase order out of this scenario. The inventory automatically fills up based on the sales numbers.
Many companies are reactive in this area because they don’t have the manpower to dedicate to inventory control. Allow the software and vendor to fill your shelves. Costs plummet as a result.
2. Do You Have Strong, Supplier Relationships?
VMI experts advise any company that implementing this automated, ordering process requires strong ties to your vendors. If you only buy occasionally from a particular supplier, VMI is not for you.
VMI is designed for companies that work with a group of vendors with these characteristics, including:
- Purchasing a variety of items from one supplier
- Placing customized orders with other suppliers on a monthly basis
The vendors must have VMI aspirations to work alongside your company. In essence, inventory management helps both parties. Vendors end up with the control as regular sales continue to drive profit margins upward. The mere mention of a VMI system might strengthen a relationship between a vendor and distributor because of the mutual benefits.
3. Are You Concerned About Inventory-Count Precision?
A major part of a successful, VMI integration is inventory accuracy. This precision stems from the proper hardware and software supporting the system. As a distributor, you need the latest software and hardware in order to save the inventory information as it ebbs and flows through the day.
Your vendor must also have a strong, IT department. If you work with multiple vendors, everyone must be on the same page when it comes to software. Always have these items in place before implementing any VMI system, such as:
- Software updates
- Encryption and password protection
It takes some planning in this department before VMI can go live, but it’s worth the effort. The vendors and distributors can then work as a virtual team to keep products flowing between their warehouses.
4. Do You Feel Comfortable With a Paperless Office?
A question that’s often overlooked when considering VMI is the paperless factor. You won’t have a paper trail of purchase orders and approved invoices. There’s a virtual trail within the VMI software as an alternative. This documentation might look something like this, such as:
- Time stamp of inventory analysis sent to the vendor
- Receipt of analysis at the vendor’s location
- Shipment confirmation of goods being sent out according to analysis
- Updates on shipment en route to your location
All of this information runs through the system. You can always print it out as a hard copy, but most companies opt for a paperless configuration. If you’ve been looking to get into the world of paperless orders, VMI is a perfect place to start your transition.
When you’re sure about your answers to these questions, contact Motion & Flow Control Products, Inc. VMI seems complex at first, but a precisely executed system will function seamlessly each day. Simply partner with an expert team to see what your inventory can do for y