Vendor Managed Inventory
Definition of Vendor Managed Inventory
Vendor Managed Inventory: A means of optimizing Supply Chain performance in which FloChem is responsible for maintaining the customer's inventory levels.
FloChem has access to the customer’s inventory data and is responsible for generating purchase orders. To further define it, let’s look at two business models:
Typical Business Model
Under the typical business model, when a customer needs product they place an order with FloChem. The customer is in total control of the timing and size of the order being placed. The customer maintains the inventory plan.
Vendor Managed Inventory Model
With a Vendor Managed Inventory (VMI) model, FloChem receives electronic data from a satellite that relays the customer's stock levels. FloChem is responsible for creating and maintaining the inventory plan and under VMI FloChem generates the order rather than the customer and confirms delivery date.
Benefits of Vendor Managed Inventory
The Benefits of VMI are numerous for both FloChem and the Customer.
Dual Benefits
- No phone or internet required. All you need is simply a 110V to "Plug & Play".
- Data entry errors are reduced. Speed of the processing is also improved.
- Both parties are interested in giving better service. Having the correct amount of product in stock ready for use.
- A true partnership is formed between FloChem and the Customer. Both parties work closer together and strengthen their ties.
- Stabilize the timing of Purchase Orders - PO's are now generated on an as needed basis or blanket PO’s can also be used.
Customer Benefits
- The goal is to have an improvement in Fill Rates from FloChem. Also, a decrease in stock outs and a potential decrease in inventory levels.
- FloChem will deliver less often resulting in fewer orders being received by your personnel.
- Planning and ordering costs will decrease due to the responsibility being shifted to FloChem.
- The overall service level is improved by having the right product at the right time.
- FloChem is more focused than ever in providing great service.
- There is no cost to the customer, FloChem provides the satellite dish and electronic monitoring as a “Value-Added Service”
FloChem Benefits
- FloChem can better manage their distribution costs resulting in “Best Case” pricing to the customer.
- A reduction in customer ordering errors.