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Vendor Managed Inventory Strategies for Streamlined Marketing

Vendor managed inventory strategies improve customer service and can reduce data transfer problems as well as reduce transportation costs and logistics...and that's greener.

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Vendor managed inventory optimizes supply chain performance by partnering with the manufacturer to maintain the distributors inventory levels. The manufacturer has access to the distributors' inventory data and is responsible for generating purchase orders.

Traditional Business Model

In the traditional business model, when a distributor needs additional product, it places an order with the manufacturer. In a vendor managed inventory system, the distributor is in total control of the timing and size of the order being placed and the distributor maintains the inventory plan.

Vendor Managed Inventory Model

The manufacturer receives electronic data via EDI or the internet that documents the distributor's sales and stock levels. The manufacturer can view all items carried by the distributor as well as point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan and generates an agreed upon level of order fulfillment for the distributor.

Some of the benefits of a vendor managed inventory system include:

  • Data errors are reduced and the speed of data processing is improved due to computer to computer communications.
  • Both the manufacturer and distributor are interested in giving better service to the end customer by having the correct items in stock for delivery.
  • Partnering between the manufacturer and distributor strengthens their competitive advantage and their loyalty.
  • Purchase Order timing is smoothed and simplified.
  • Distributors benefit with improved "fill rates" for the end customer with a decrease in both stockouts and inventory levels.
  • Planning and ordering costs can decrease due to simplification and responsibility shifting to the manufacturer.
  • Manufacturer forecasting and promotions can be more easily incorporated into the inventory plan.

Some of the suppliers of vendor managed inventory software include Datalliance, Arvato, ClearOrbit and Lansys.

Demand chain optimization is offered by Manhattan Associates and Manufacturing Systems Group.

Marketing Benefits

It's pretty obvious that better availability and streamlined order fulfillment are marketing advantages for both a manufacturer and distributor. It can also mean a marketing advantage for assembly companies that depend on optimized supply chain management to meet their just in time or lean manufacturing strategies.

With Internet procurement procedures, immediate response to inquires are becoming more important, and streamlined data processing and inventory levels are part of a strategy that makes order fulfillment rates a competitive advantage.

Less shipping is also a green advantage. There is no reason to double ship products from manufacturer to distributor to customer in this day of data management and trackable shipping.

Vendor managed inventory is often used by broad product line manufacturers, but as downsizing simplifies product lines, this streamlined marketing system will reach into smaller and smaller manufacturing sectors and operations.

Edited by Carolyn Allen, owner/editor of California Green Solutions
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