One of the best and most cost-effective methods of managing the supply process is vendor managed inventory, as this system offers a lot of great advantages. Many companies have succeeded with the use of this system, especially in light of this competitive system with regard to business. Modern technology can help you keep your business running smoothly, thus you can manage your inventory efficiently. In this article, we will learn what vendor managed inventory is, as well as the types of vendor managed inventory.

What is vendor managed inventory?

It is one of the best inventory control techniques through which the company itself or the supplier of merchandise takes responsibility for the improvement of the inventory held by the same distributor.

Through the vendor managed inventory, electronic exchange technology is used through the Internet to communicate with the supplier, so that the process is planned successfully and efficiently.

The vendor managed inventory method is different from the traditional inventory management method, in that the vendor manages the inventory.

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How does vendor managed inventory work?

Vendor Managed Inventory

As for the way the vendor managed inventory works, the seller in that process must possess accurate inventory information in order to be able to use that method in the work.

This method also requires that both parties have an effective system that helps in managing inventory and providing the data required for this system to function efficiently.

The parties also need to agree on a number of details such as how the stock will be handled and stored, as well as how the excess stock will be returned

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The typical vendor managed inventory process

A typical approach is to use a vendor managed inventory, which begins after the buyer and seller have agreed on the details of this system.

There are a set of basic steps that take place in the vendor-managed inventory process, and the following are those steps:

  1. The seller ships the inventory to the buyer initially.
  2. The seller has access to the buyer’s sales data, through which he monitors the pattern of sales.
  3. The seller reorders the stock and delivers it to the buyer, according to the agreed reorder point.
  4. The time periods for each product are agreed upon.
  5. The seller informs the buyer that the products have been shipped, so the buyer will not need to raise the purchase order.

So, with the vendor managed inventory method, the buyer should be comfortable, especially as he will share the sales data with the seller.

Types of vendor managed inventory

Vendor Managed Inventory

There are many types of vendor-managed inventory that can be used, and the method that best suits the seller and buyer is chosen. The following are the most important types of VMI:

Vendor-led physical checks

This type checks the store’s stock levels and restocks when needed.

Buyers ordering inventory: This type means that the buyer can order inventory from the seller when he needs it, and then the seller delivers it.

Synchronized inventory systems

A vendor managed inventory system that integrates inventory management software with the buyer and seller so that they are able to synchronize supply and demand.

On-site inventory planning staff

In this method, the seller provides a chart at the same location of the buyer who manages the inventory.

Dedicated space for vendors

A vendor-managed inventory method in which the seller is allowed to use the buyer’s storage facilities and use that space to manage the inventory.