For a business that is used to managing its own inventory, switching to a vendor managed inventory (VMI) system may be an intimidating idea. Inventory is essential to most business operations, and it often is one of the biggest items on the balance sheet.
Letting an outside company take control of such a vital part of a business can feel like climbing into a new roller coaster or jumping into an unfamiliar pond. But the process need not be stressful, and in fact, can lead to important cost-saving insights into a business’s inventory processes.
4 Steps to VMI Implementation
Starting a VMI program typically follows these steps:
1. Get to Know Each Other
The first step of starting a VMI program is to take the vendor-customer relationship to another level of trust and understanding. Before a VMI process can begin, the partners need to share a lot of sensitive data that they are accustomed to keeping secret.
Establishing avenues for clear and open communication is crucial to developing a responsive program. The vendor and customer need to have a clear idea of each other’s goals for the program and how it will fit into short- and long-term plans. A VMI expert like DXP can facilitate this process.
2. Get Organized
The transition to a VMI program is much easier if the customer’s existing inventory is well organized and cataloged. If the customer’s inventory management system is missing pieces to make this process work, now may be the time to implement better practices, like labeling, so the transition to VMI goes smoothly.
3. Prepare Inventory Data
VMI implementation relies on a steady stream of good data about inventory, from existing stock to how demand changes over time. Compiling accurate data in a format that will be useful for both the customer and the vendor may require some process adjustments. This may also be the right time to study how data will pass between the customer and vendor.
4. Set Targets and Adopt an Order Process
The flexibility and responsiveness of a VMI program allows for tighter timeframes and leaner overall inventory at customer locations. For that to happen, the vendor bases its replenishment process on the customer’s actual targets and projections. Establishing VMI best practices like order quantities and inventory replenishment strategies gets easier once everyone has a clear picture of past demand and future plans.
DXP Is a Trusted Provider of VMI for Industrial Operators
DXP Enterprises provides comprehensive supply chain services, helping businesses adopt cost-saving processes like VMI. Our experienced team of materials handling experts can address the needs of companies of any size or scale.