Vendor Managed Inventory (VMI) – do you need software? Of course, the answer is “It depends.”
A few items to think about to determine if you need software to support a VMI initiative:
1. Are you interested in doing VMI with your suppliers, customers or both? For suppliers, the focus is on the transfer of data. For customers, you’ll need to create orders and transfer data at a minimum.
2. How many suppliers and/or customers and customer locations do you plan to pursue with VMI? If there are few, manual will work just fine. We have achieved vast success with aerospace clients using portal data and manually creating orders.
3. How integrated do you need VMI to be with your ERP system? For example, when I was VP of Operations at PaperPak, we implemented VMI with our #1 customer, Baxter Healthcare/Shield Healthcare and so we figured out what to send to their locations throughout the U.S. We provided such excellent service that we won supplier of the year two years in a row! However, even better, we were able to gain huge benefits on our side with inventory turns, logistics efficiencies, gains in business etc. In our case, VMI was separate; however, the orders had to be visible in both systems, and the forecast had to go to ERP as well. However, we didn’t have to physically scan items at our customers’ locations which might require a direct connection depending on your setup.
4. Are your suppliers/customers EDI capable? Do they use portals? If they use portals, does your ERP system have portal capability? Or do they send spreadsheets? Or emails? Technical capabilities will play an important role.
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