8 Vendor Selection Criteria for Choosing a VMI Provider
Every business owner knows that choosing the right vendor requires getting honest answers to your buying questions. But in order to get these answers, you must first know what questions to ask. Something I'm often asked when I'm meeting with potential Vendor Managed Inventory (VMI) customers—particularly those who aren't already doing VMI today—is, "What should I consider when evaluating VMI solutions?"
It's a great question. If you've never shopped for a VMI platform before, or if you have limited experience working with different VMI platforms, you simply don't know what you don't know. Luckily for you, we’ve got over 25 years of experience in providing VMI to our customers, and we’ve learned a thing or two. So, to help you find the perfect provider, here are eight vendor selection criteria to consider.
What to look for in a Collaborative Replenishment VMI Vendor
Looking at solutions you can’t afford is a waste of your time. But, selecting a software solution based on price alone is a surefire career-limiting decision. The key is to compare solutions considering the total cost of ownership. Some providers charge extra for start-up implementation and training, while others do not. Some providers charge extra for ongoing VMI customer support, while others do not. Some providers offer relatively fixed, predictable pricing, while others offer variable pricing that can fluctuate dramatically from month-to-month.
Generally, a VMI provider that follows a standard software as a service (SaaS) pricing model in which there are very little ancillary charges offers the most economical total cost of ownership. Ask your prospective vendors for a pricing schedule that includes any services or offerings not included in their "core" offering. Make sure to inquire about included support options, as well as capabilities that will be updated to keep up with changes to your business system and trading partner maps.
#2 History of Proven Success
This is such an obvious criterion that many overlook or take it for granted. The sad truth is that many software companies are excellent self-promoters, but their solutions over-promise and under-deliver. In order to get the truth, you need to look beyond a vendor's website and marketing materials.
First, look to third-party sources that provide global recognition, such as Gartner and IDC, as well as trusted review sites like G2 Crowd. Second, scrutinize a vendor's current client list and customer success stories. Look for companies that "look like you" as well as those that are considered leaders in their respective areas. Third, ask for and talk to a vendor's references. Finally, consider the vendor's experience and tenure offering VMI. VMI may be new to you, but it's not new to the world. Choose a vendor with a proven track record and obvious commitment to providing a world-class VMI solution.
#3: Scalability and Flexibility
There may be many tactical reasons for starting a VMI program (e.g., a key customer wants to do it), but there should also be strategic thought given to the decision. It's easy to get wrapped up in the near-term considerations such as price, initial implementation speed, training, etc. at the expense of longer-term considerations such as the ability of the platform to grow and scale with your VMI program. Your company is likely to look a lot different five years from now and your needs will be different, too. Look for a vendor whose solution is utilized across a diverse landscape of customers and who has experience with both large and modest VMI programs.
#4: IT Impact
Like it or not, your IT department is going to have a say in the decision at some point in the buying process. They will need to assess compatibility with your existing systems and they will need to determine resource requirements--both implementation and ongoing. IT is rarely tasked with selecting a VMI provider, but they can certainly block (or delay) a purchase. There is no excuse in this day and age for selecting a VMI platform that requires a capital investment in hardware, or one that involves software installation and maintenance.
Selecting a VMI platform provider that offers a cloud-based solution is paramount. Hosted software solutions are typically less expensive than their terrestrial counterparts. They are easier to implement, maintain and support. Ask your prospective vendors for a standard project plan and talk to at least one technical reference who can speak to their experience during the implementation process.
#5 Customization and Adaptability
VMI is not a "one size fits all" solution. Not only do different VMI customers have different needs, but also the same VMI customer can have different needs based on different trading partners. Therefore, a VMI solution should be able to adapt to different situations. Does it permit you to replenish to distribution centers, mixing depots, or direct to store? Does it allow you to build orders capable of being cross-docked, or trucks capable of conducting "milk runs" (multi-stop)? Does it build ideal trucks, whether less-than-truckload (LTL) or full-truckload (FTL), based on a variety of criteria (e.g., cube space, weight, shipment value, etc)? Does it allow you to automate returns in addition to putting product into the supply chain? Use these questions to start your list, and add more about your unique business to make sure your chosen provider can meet your needs.
#6 Customer Service and Support
Is the VMI provider simply selling you a software package, or do they provide a fully managed service to ensure you are optimizing your program and maximizing your return on investment? No matter how "intuitive" or "easy to use" a VMI program is (or claims to be), your planners will have questions and will need help from time-to-time. Oftentimes this can be the single greatest differentiator between VMI providers--and the most valuable. There's only one good way to evaluate a VMI provider's post-sales support: ask their existing customers!
#7 Range of Services
Multi-vendor solutions can sometimes give you a “best of the best” scenario. But, more often than not, relying on a multitude of supply chain vendors leads to a patchwork approach with plenty of communication pitfalls, both between teams and software systems. When evaluating a potential VMI provider, you’ll also want to ask, “What else do you do?”
For example, TrueCommerce offers a robust VMI service on our Datalliance platform. But, our Foundry Unified Commerce platform also includes everything from eCommerce storefront and marketplace connectivity, to integrated EDI that works with a bevy of Enterprise Resource Planning (ERP) systems, to product information management and even drop ship support that works with more than 60 global carriers. New customers can start with VMI alone, but add other resources as needed, and if they do, they’ll never need to worry about incompatible technologies or vendor disagreements.
#8 Continuous Innovation
Innovation is the lifeblood of any true software solution. Rapid developments in both technology and business practices require software companies to constantly innovate and enhance their offerings. Innovation shouldn't be an ad hoc process, an afterthought or reaction. It should be a rigorous, disciplined behavior installed in the core of the company itself. It should account not only for new developments in technology, but it should also be responsive to the input and needs of its user base.
This is another reason why a cloud-based SaaS solution is critical as software companies regularly release updates to their platform. Ask your prospective vendors about their product roadmap and innovation process. They should willingly share with you the time frame and content of their previous releases.
Finding the Right VMI Provider for Your Business
Choosing a VMI provider is no small project, so it’s important to cover all your bases throughout the decision-making process. Whether you are considering VMI for your organization for the first time, or are considering switching VMI providers, these eight vendor selection criteria will enable you to make an informed purchase that will benefit you, your organization, and your customers.
New to VMI and want to learn more? Check out our guide to Vendor Managed Inventory and Collaborative Replenishment. Interested in learning about our Collaborative Replenishment solution? Reach out to one of our VMI specialists for more information.
About the Author: Scott Kleinert is a global sales executive with more than 25 years of experience in supply chain strategy development. He is currently responsible for TrueCommerce’s collaborative management service offering with specific expertise in the consumer goods and retail industries. Scott leads the team that initiates and develops the TrueCommerce vendor managed relationships as well as cementing the value associated with these collaborative initiatives. Scott lives in South Carolina, taking advantage of all that coastal living offers.