Vendor Managed Inventory (VMI) can be an effective strategy for companies looking for cost savings and a more stable supply chain. In this post, we will outline the benefits of VMI as well as the services that CGR Products provides with these programs.
What is VMI?
VMI is a program where the supplier manages your inventory for you. These programs helped make some of the largest retailers the giants they are today. After seeing these successes, manufacturing caught on as a way to move toward lean practices and to become a demand-driven supply chain.
With traditional purchasing and stocking methods, sales are predicted and inventory is ordered based on the forecast. This method comes with risks of buying too much or too little. In the event of too little inventory, a risk may be present if the supplier cannot meet the higher than expected demand and lost sales may occur. Too much inventory will tie up money and can cause warehousing (cashflow) issues.
With VMI, the goal is for the customer to only buy what they are moving. Using VMI requires a very close relationship between the customer and the supplier. Using technology to maintain constant contact between both parties, the customer can purchase in smaller batches and avoid emergency orders. Using this data allows both parties to work off of much more accurate forecasts.
CGR Products & VMI
CGR Products has been providing VMI services to our customers for many years. Based on great relationships and communications with our customers, we keep properly maintained inventories based on actual usages and forecasts. Our VMI programs give us more control so we can manage raw materials and be more efficient.
CGR Products can offer many different configurations of VMI. Working with our customers to find the VMI system that works best for them is the key.
One common aspect of the program is a bin system that is serviced by our own delivery driver. Highlights of this system are:
- Bins are set up at the customers’ location where they are physically needed.
- The driver counts the inventory on hand.
- Determines the appropriate re-order quantity based on recent usage and predetermined stocking levels.
- Enters the quantity consumed and the quantity to be re-ordered.
- Electronically scans the provided barcode label on each bin to assure accurate capturing of the item details.
- Orders are electronically transmitted directly into CGR’s manufacturing system via our proprietary inventory technology.
- On the next visit, stock is rotated, new stock is scanned into inventory, and the bins are refilled to the acceptable level.
- VMI runs on a revolving weekly schedule, with deliveries occurring once per week or multiple times per week depending on customer requirements.
Other Programs CGR Products currently works with include EDI and Portals. CGR Products works directly within customer portals to maintain inventory and execute orders. Orders are electronically placed directly into our manufacturing system from the portal. These types of systems allow for more accurate order fulfillment with fewer errors and often include electronic shipping notices, invoicing, and payments.
With an effective VMI system, the benefits are shared for both parties. Some of these benefits include:
- Ensuring the necessary parts are ready and available when needed.
- Smaller orders allowing for lower inventory costs.
- Better inventory turnover rate.
- Reduced administrative costs.
- More stable supply chain.
- Close communications and partnerships between customers and suppliers.
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