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Why VMI

  • What is VMI?

    Vendor Managed Inventory (VMI) is a replenishment program for optimizing supply chain performance. During VMI, a supplier is responsible for optimizing the manufacturer’s inventory levels. The VMI service provider has the responsibility and authority to make stock replenishment decisions and generate purchase orders.

    VMI is a business collaboration. The aim of this collaboration is to make the replenishment process more efficient, to optimize inventory levels at lower costs for the manufacturer, to increase demand certainty, and to generate higher sales for suppliers.

    In addition to inventory replenishment, VMI programs can address a wide range of tasks and processes. VMI programs may address the relationship between a manufacturer and its suppliers, between a distributor and its manufacturers, or a retailer and its distributors. Moreover, a VMI strategy can encompass anything from complex strategic planning and total inventory management, to a single task or a combination of inventory management tasks.

  • Why Is VMI Good for Business?

    VMI programs offer dramatic improvements in supply chain and financial performance. Replenishment decisions are made by the third-party vendor or supplier based on agreed key performance indicators (KPIs), including availability and stock turnover. Quantitative performance improvements include:

    • Increased availability of 2%‐5% (and a subsequent increase in sales revenues)
    • A 15%-40% reduction in inventory levels (and a subsequent decrease in capital costs)
    • Fewer Out-Of-Stock (OOS) items
    • An improvement in production scheduling efficiency
    • Improved responsiveness to customer needs and dynamic market conditions
    • Stronger partner relationships

    The bigger the shipping volume with the business partner, the greater the percentage‐based potential savings. It is estimated that savings up to 2%‐3% of total turnover can be achieved with a VMI program, if applied correctly.

  • Why Outsource VMI?

    An internal VMI program must deal with multiple suppliers on its own. This can potentially lead to supply chain control issues involving inventory ownership, physical control and visibility.

    When operating VMI internally, organizations expect their personnel to have the relevant experience to connect with the right people, use the most accurate forecasting methodologies, and obtain knowledge that helps select the appropriate Key Productivity Indicators (KPI’s). Unfortunately, regardless of the staff’s professional acumen, this is rarely the case.

    To make up for lack of professional experience, many organizations invest in advanced ERP and CRM technology. While technology facilitates smart decisions, these decisions also require human judgment. Even with the best software, evaluating inventory trade-off decisions and selecting the right course of action in a collaborative discussion with cross-functional teams isn’t assured.

  • The solution is to outsource VMI

    Outsourcing ensures best practices throughout key business components and other vital processes. By outsourcing critical non-core activities, companies can focus their efforts on core activity areas.

    As a trusted third-party VMI partner, UPPRO eliminates VMI challenges as a single accountable partner that emphasizes premium service delivery, including:

    • High-caliber professionals who hit the ground running
    • Reliable operational excellence in all facilities with a team committed to peak performance
    • Access to the flexibility and creativity generated by experienced problem solvers
    • Outsourcing cumbersome administrative duties to a third party
    • Integration between all relevant components (logistics, suppliers, purchasing, inventory)
    • An intimate acquaintance with dynamic market trends and conditions

    UPPRO combines technology and management insight with in-depth experience to leverage existing software, staff and system investments. That’s how significant added-value is created.