Top 6 VMI – Vendor Managed Inventory Software
Vendor Managed Inventory (VMI) is a popular methodology that is being employed by many firms that wish to concentrate on their core competencies and so will readily outsource minor-level tasks as well as activities to others. For a distributor it makes more sense to outsource relatively inconsequential tasks such as replenishing their inexpensive products while a manufacturer will not want to be overly bothered by MRO or Maintenance, Repairs and Operations of inventory and so both should outsource tasks that are of not much importance to them.
Vendor Managed Inventory is one of the best ways to outsource procurement tasks and it only involves entering into an agreement with a supplier who must take complete responsibility of maintaining the client’s stocks at the client’s facilities. These VMI agreements are not the same as traditional consignment agreements because the client is billed for materials only when they are delivered and not when they are being consumed or even issued.
There are a number of factors that need to be addressed and included in a VMI agreement. These include the specific products that are to be covered under the agreement. Next, it is necessary that there should be an Acceptable Availability clause. In fact, normal practice is that both supplier as well as the customer will agree on a certain service level. This service level is usually a percentage of orders for any product that can be fully filled out from the VMI stock inventory. If this service level is high the customer will then have to invest more money in the products from the supplier.
Another important aspect to the VMI agreement is the periodicity (frequency) of replenishment of the products. It is also necessary to specify whether there is automatic return of materials that are no longer required by the customer.
Customers benefit from entering into a VMI agreement because such an agreement helps eliminate costs of managing the replenishment of the different parameters and there is also no need to worry about purchase orders. It helps the customer to have a reliable source for supply of whatever important products the customer needs to operate their business and this is achieved at a very low cost.
For their part, suppliers too will benefit from entering into a VMI agreement as it will have succeeded in securing the customers business for many different types of products. In addition, the supplier is also able to plan in a more efficient manner the replenishment of their inventory.
At the same time, there are also certain risks associated with the vendor managed inventory. For suppliers it would mean bearing a huge risk in terms of high costs of administering the program. The risk that the supplier has to bear arises from the large responsibility acquired in ensuring proper and efficient replenishment of the customer’s inventory.
Customers also have to bear certain risks including relying on just one source for all their needs and they have to be sure that costs do not exceed a certain level. More importantly, there is also risk of confidential information being leaked.
However, a VMI agreement that has been well structured will provide more benefits to both parties and so the risks involved are bearable.
Top 6 VMI – Vendor Managed Inventory Software:
VMI : Vendor Managed Inventory Software, with over 300 implementations of the Generix is the world number 1 in Collaborative Flows Management.
ERPLY is online point-of-sale and retail software system. Manage and scale your business, from one store to many, in the cloud. Get started free today.
EnterpriseIQ Manufacturing ERP system supports the ability to manage inventory stored at the customer site -Vendor Managed Inventory (VMI).
Thrive Technologies increases inventory profitability for wholesale distributors and retailers with its award winning cloud based demand forecasting, inventory replenishment, and inventory optimization software and services.
Parksity VMI inventory application can help your business manage its complex inventory requirements and gain insight into consumer driven demand. You’ll be able to understand the specific requirements of each business partner and automatically generate orders and replenish inventory.
Our Vendor Managed Inventory software solution provides an internet based tool that is branded to look like your system and manage your inventory with ease.
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