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VMI to fix the distributor and manufacturer partnership

VMI - AMG Logistics

VMI – What is it?

Imagine if your doctor could act remotely at any moment and have access to real-time data on your blood pressure, heart rate, cholesterol, blood sugar, and brain wave patterns. Enterprise software has advanced to that stage, but medical technology hasn’t quite reached there yet.

Vendor-managed inventory (VMI) is the term for it.

A Dose of VMI

A beneficial side effect of VMI is that it can treat a condition that has become practically pandemic over the past several years: the distrust that the Internet has fostered between distributors and manufacturers.

Many distributors are wary of manufacturers because they believe they may start selling to consumers directly online. Manufacturers are wary about the Internet’s ability to provide distributors quick access to a sizable supplier pool with which they may haggle for the best pricing and delivery conditions.

In VMI, the manufacturer oversees preserving the stock levels of its clients. Essentially, the distributor helps the producer create an inventory strategy and provides inventory and sales history information. The manufacturer receives sales and inventory information from the client on a weekly, or even daily, basis. Based on these findings, it supplies merchandise and adjusts its inventory strategy.

A VMI partnership can provide several advantages for both parties. In general, they save money by running more efficiently, managing inventories better, and having access to working capital that was previously restricted to fixed assets. Because it can predict demand, the company can plan production and fulfil orders more precisely and rapidly. The expense of planning and ordering is not incurred by the distributor, who has less inventory on hand. By delivering the appropriate goods to the appropriate locations at the appropriate times, it also benefits from better service from the producer and better serves end customers.

VMI‘s path

For a manufacturer to successfully manage vendor-managed inventory, they require an enterprise information system that:

  • Possesses trustworthy forecasting methods for examining demand.

  • Contains information that the distributor might use to identify replacement products as promising as of the delivery date.

  • Has internal business intelligence tools that can analyse data and provide the distributor with measurable outcomes.

The enterprise of the distributor should let it to:

  • Automatically feed inventory and sales data to the manufacturer, saving it from having to enter data manually.

  • Deliverables should be distributed across client orders.

  • To further simplify the process, plan shipments from the manufacturer to the consumer.

Using a conventional business system would make it challenging to adopt a VMI strategy, especially if it is older than five years. Typically, these systems weren’t intended to function outside of an organization’s borders. However, a distributor or manufacturer has a good foundation for a VMI collaboration with a contemporary, powerful enterprise information management system.

Determinants of VMI system success

An enterprise information management system should: in addition to a distributor- and manufacturer-specific features:

  • To transform the data from the distributor into a format that the manufacturer’s system can use, and have import/export tools available.

  • can control the distributor’s inventory.

  • run online and have every component of the system work in web browser mode. Internal communication inside the system must be supported, most frequently utilizing XML.

  • Provide other software developers with an application programming interface (API) so they may create the code required for information sharing.

  • be properly parameterized to allow users to tailor the program to their own business needs.

VMI may assist middle-market manufacturers and distributors in building long-term collaborative partnerships, streamlining processes, and using the Internet as a business tool to boost competitiveness if it is well-planned and backed by a flexible enterprise information management system.

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