Vendor-managed inventory (VMI) has been around for a while. Yet many buyers are still ordering parts as they need them, paying full price for short-run orders and carrying the risk of overstocking or part shortages. If you’re looking for ways to lower costs, simplify ordering and keep your critical parts in-stock, then you should consider finding a partner that offers VMI.
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Here are four ways you benefit:
1. Strength in Numbers
Since VMI negates the need for calculating, producing and sending multiple purchase orders, buyers can experience significant savings on the admin size of the equation. But where VMI can really deliver big savings for buyers is in bulk order placement. Every buyer knows that there is buying strength in large order numbers. VMI allows you to drive down the cost per piece and save the organization the cost of paying for multiple set-ups and production runs.
VMI parts stored by the supplier reduces the cost of warehouse space and manpower for the buyer.
2. Running Lean and Mean
For most organizations, inventory levels and cash flow are tied at the hip. With VMI, suppliers carry the burden of producing, stocking and storing parts. This keeps inventory levels (and the $$ tied up in them) low. Lower parts inventories also translate into less need for warehouse space and manpower leading to additional cost savings.
3. Plan the Work, Work the Plan
VMI gives machine shops the ability to accurately forecast production. This, in turn, leads to increased production efficiency and smoother inventory flow. Vendors can optimize manufacturing workflow and deliver parts as-needed. VMI also gives vendors total visibility into their customers’ inventory levels, helping them to consistently meet demand and reduce inventory errors.
4. “I think this is the beginning of a beautiful friendship.”
The best (and most often overlooked) part of VMI is that it solidifies a true partnership between you and your machine shop. They depend on you to give them a stable revenue stream and you depend on them to keep your lines running. This co-dependence creates a foundation of trust and over time a track record of success—and every buyer in the manufacturing world knows that solid relationships with vendors you can trust and rely on are priceless.
