To guarantee effective inventory management within a VMI approach, suppliers must be able to rely on a high-performance collaborative solution. What criteria should a vendor consider before implementing a collaborative VMI approach? Let’s take inventory of the fundamental KPI.
Inventory control and coverage
In a customer/supplier relationship, inventory management can take on a shared approach between the retailer and the vendor: we call this shared supply management. In a VMI (Vendor Managed Inventory) context, supplying warehouses and shops is entirely the responsibility of the supplier, who must ship the products based on customer needs.
In order to effectively manage supply operations, suppliers need to accurately monitor their inventory to guarantee a good coverage rate. With updated information on inventory levels in warehouses and shops, suppliers can cover product demand and prevent surpluses and stockouts. Goal: have the right amount of the right product at the right time, thanks to a very keen assessment of needs.
To manage supply operations as accurately as possible, suppliers base their forecasts on the provisional trends generated by the VMI solution. To increase efficiency, the management tool must be able to clearly and quickly calculate demand forecasts. Not only this, but it must also allow you to check their reliability at the end of a cycle (daily, weekly or monthly) to review future supply needs.
Imagine the software forecasted a supply need of 200 boxes, to which a safety stock was added. At the end of the cycle, we must be able to verify that the forecast matched the number of sales made. Goal: make any corrections needed for the next supply cycle to ensure nothing is left to chance.
VMI service rate
When retailers decide to opt for a collaborative supply management model, they aim to obtain an optimal service rate. Main goal: never again have stockouts and always satisfy shop demands.
By delegating supply management responsibilities, a retail company seeks to optimally fulfill the needs of its stores while reducing inventory. As such, suppliers must be able to ship the orders coming in on a daily basis from the different points of sale to optimize their service rate.
On the same topic: How has the VMI market evolved?
In a vendor-managed supply model, the performance of the VMI solution used is fundamental for facilitating collaboration between both actors. Only with accurate inventory control and reliable demand forecasts will you achieve an optimal service rate— a must if you want to build the relationship of trust that is so essential to the success of a vendor-managed inventory model. Want to join in on the collaborative adventure? Discover Generix Group’s VMI solution!
Download product information for Generix Group’s VMI solution
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