Guide to Successful Vendor Managed Inventory Partnership Programs

Electronically sharing information between members of the supply chain resulting in shorter lead times, reduced inventory, reduced obsolescence, and more efficient manufacturing. The up-stream member of the supply chain (the supplier) takes on more decision making for what to supply to the customer. The result is a more leveraged relationship for the supplier and improved service for the customer.

For the customer, the leverage already exists. The customer’s top priority is to have zero inventory on the books. This usually means “consignment stock”, with invoices accepted upon use of the product. These programs are called “SMI” or Supplier Managed Inventory programs. Using this approach dramatically reduces the number of suppliers and in some cases single-sources a product or groups of products.

For the supplier, it is about gaining leverage and becoming a single source for the customer. It can even present the opportunity to administer a supply chain program between a supplier’s customer & that customer’s clients which would insure that the supplier’s material is prevalent all the way through the supply chain.

A good VMI solution has to be flexible enough to accommodate a wide range of data formats, the delivery method of data between partners, and any business rules required. Without these capabilities, a VMI initiative will require significantlymore technical and financial resources.


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