Benefits of Vendor Managed Inventory

 

The Benefits of VMI are numerous for both Manufacturer & Distributor. Here is a partial Listing:

 

DUAL BENEFITS:

·        Data entry errors are reduced due to computer to computer communications. Speed of the processing is also improved.

·        Both parties are interested in giving better service 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.

·        Stabilize the timing of Purchase Orders - PO's are now generated on a predefined basis.

 

DISTRIBUTOR BENEFITS:

·        The goal is to have an improvement in Fill Rates from the manufacturer and to the end customer. Also, a decrease in                  stock-outs and a decrease in 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 on providing great service.

 

MANUFACTURERS BENEFITS:

·        Visibility of the Distributor’s Point of Sale data makes forecasting easier.

·        Promotions can be more easily incorporated into the inventory plan.

·        A reduction in Distributor ordering errors (which in the past would probably lead to a return)

·        Visibility of Stock Levels helps to identify priorities (replenishing for stock or a stock-out?). Before VMI, a manufacturer                has no visibility of 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.