Operations Payoff

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Benefits of Vendor Managed Inventory

Vendor Managed Inventory (VMI) is a collaborative approach that has great value for both the customer and the supplier. With VMI, the supplier has access to customer inventory information and is responsible for maintaining required inventory levels. It can be applied to more than just parts, and is often used for printed materials, supplies, equipment repair and so on.

Benefits to the customer include:

  • Reduced total cost of ownership
  • Improved service levels (lower stock outs)
  • Improved inventory turns
  • Reduced floor space
  • Reduced efforts on the part of buyers for replenishment
  • Reduced obsolete inventory

VMI can improve profitability and use of assets. Consideration needs to be given to which suppliers can be relied on, which parts should be covered, and what access the supplier will be given. Good planning and management are critical for success, but the rewards can be great.

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