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Having greater visibility into inventory turnover is one of the major challenges guiding the relationship between industry and its sales channels (distributors, resellers, or points of sale). After all, how can inventory management techniques in the production chain be improved so that production and inventory at each link in the chain align with actual demand?
The answer lies in smart inventory management through VMI (Vendor Managed Inventory).
VMI is an incredible tool that can represent a new step in inventory management across the entire production chain of an industry.
It is a methodology capable of preventing stockouts at distributors and points of sale and optimizing the production process.
But how does it work? And what are the benefits for industries and distributors?
Additionally, which VMI tool can best contribute to your business? Find the answers to these and other questions in our content.
VMI: Learn More
VMI, or Vendor Managed Inventory, is a highly intelligent business solution.
In this model, distributors, resellers, and points of sale provide the manufacturer with full access to inventory information, which then assumes complete responsibility for effectively managing this inventory.
Thus, through VMI, it is less likely that the sales channel will run out of stock on a product involuntarily.
It also serves as a strong motivator for reducing inventory in the supply chain, freeing up capital tied up in the channel's cash flow, and thereby leading to better inventory management.
It is a concept aimed at balancing inventory levels with product consumption.
In this way, the sales channel does not have to suffer from uncertain industry lead times. Conversely, the industry itself is not harmed by failures in demand forecasting.
Both parties complement each other and gain mutual benefits.
As mentioned, VMI operates by accessing sales data and inventory movements directly from the distributor and their points of sale.
With such detailed knowledge of retail needs, the industry itself is responsible for replenishing stock and shelves.
However, it is important to understand that demand reading is not instantaneous. Obviously, the supplier cannot prepare for varying production levels solely based on daily sales tracking.
With VMI, the process is supported by more accurate forecasts that take into account sales history, trends, seasonality, and other important factors.
VMI: Benefits for Manufacturers and Distributors
When VMI is implemented, there are several mutual benefits for manufacturers engaged in indirect sales, distributors, and their points of sale.
Autonomy for the Manufacturer
The main aspect is that the responsibility of supplying the distributor and retail with goods when needed falls on the supplier.
Removal of Safety Stock and Optimized Inventory
VMI eliminates the need for the customer to maintain significant safety stock, as the supplier manages the replenishment timings. Consequently, this lower inventory level can streamline the entire processing of goods as they complete the supply chain logistics.
It is a measure that optimizes inventory management by allowing for a smaller, more suitable warehouse that aligns with the supply chain.
Reduction in Administrative Costs Related to Purchases
With VMI, the need for order corrections and reconciliations is removed, which further reduces purchasing costs.
Cost reductions can also be achieved through decreased product storage. After all, the less space required, the fewer resources are needed in the daily operations of the warehouse.
In addition to these benefits, as the supplier receives data rather than purchase orders, the purchasing department spends less time calculating and producing orders—which can further lower the logistics process costs.
Greater Visibility into Promotion Calendars
As the manufacturer has more visibility into their customers' inventory levels, it is easier to ensure that stockouts do not occur, as they will know when items need to be produced.
Manufacturers can also incorporate their customers' promotional plans into forecasting models.
This means there will be sufficient inventory available when their promotions are underway.
How Implanta Can Assist in the VMI Process
Once correctly implemented, the VMI model can help the industry provide its customers with what they want and when they want it.
Moreover, it is a concept that can help keep costs low.
After all, the goal of VMI is to maintain the correct inventory levels at the point of sale so that the supplier can replenish stock when necessary.
However, this process integration must be well-executed to avoid communication issues that could harm the supply chain.
This is where Implanta comes in with its Distribution Visibility solution!
The name says it all, right? It is a platform that captures data directly from distributors' ERPs, aggregating all information about inventory and sell-out to facilitate analysis.
In other words, a solution that, among other features, provides you with all the tools of a true VMI platform.
It will help you stay updated with the needs of your channels (distributors, resellers, and points of sale), as well as assist in other analyses, such as product performance and batch traceability.
It is pure market intelligence for refining your supply chain strategy, optimizing operations, reducing costs, and enhancing results.
Among the benefits of the Distribution Visibility solution, we can highlight:
- Improvement in Logistics;
- Reduction in Stockouts;
- Optimization of Final Selling Prices;
- Corrección de falta de surtido de productos.
These are just a few of the advantages of having Distribution Visibility.
Want to learn more, understand how the platform fits into your company, and how it can enable the entire VMI process?
Just contact us to schedule a pilot project!!
And if you want to stay updated on market trends and ways to optimize your business management, be sure to keep an eye on the latest content from the Implanta blog!
