Many businesses are looking to optimise their inventories and ensure they always meet demand. Although global conflicts and economic instability are putting pressure on many industries, many manufacturers are experiencing an increased demand for their products.
Not only are businesses trying to ensure they have parts when and where they need them, but guarantee they don’t have too much stock, which can waste time, money and physical space. A significant number of businesses are still relying on non-managed inventories. These work well for businesses with limited bills of materials (BoMs) who source from one vendor, but they can often fail to meet demand for businesses with more complex part requirements.
An increasing number of businesses are implementing Vendor Managed Inventories, or VMIs, as they seek to streamline their supply chains, lower their outgoings and boost productivity.
What is a Vendor Managed Inventory?
A vendor managed inventory is a form of stock management in which the supplier, or vendor, provides the inventory to the customer. The supplier takes on all the responsibility for the customer’s parts, making sure they are always stocked to meet demand. Using a VMI can simplify and reduce the cost of the ordering process, all while reducing a business’ TCO (Total Cost of Ownership), as the supplier assumes the cost and associated risk of managing their supply chain.
Using demand planning and forecasting, as well as regular customer updates, the supplier can then deliver exactly the right number of parts as and when they’re needed.
What is a Non-Managed Inventory?
A non-managed inventory, then, is an inventory managed solely by the business themselves. They may source from many different suppliers from different locations, and remain totally responsible for their own stock levels, inventory and labour costs.