Reclaim Control of Your Inventory with VMI

Vendor Managed Inventory (VMI) is a streamlined approach to inventory management and order fulfillment. VMI involves collaboration between suppliers and their customers (e.g., distributor or retailer), which changes the traditional ordering process.

The goal of VMI is to align business objectives and streamline supply chain operations for both suppliers and their customers. The operational benefits that can be leveraged by those companies operating a VMI software solution are a result of improved inventory turns, improved service, and increased sales.

Modern VMI brings together multiple data streams to speed up and optimize stock levels at a retailer. To achieve this, there has to be a mutual agreement between the retailer and supplier to use VMI and subsequently share the relevant data.

Once an agreement is met, the next step is for the retailer to share data with the supplier; this data usually provides:

Stock levels

To achieve the most basic VMI functionality, stock level information is required to keep the supplier updated about reducing stock levels.

Logistics timescales

Accurate forecasting can only be realized by building logistics timelines specific to that particular supply chain into the model.

Seasonal trends

An additional layer of intelligence can then be added to the forecasting model by taking historical seasonal trends from the retailer and feeding those into future stock-level forecasts.

Short-term trends

Achieving the next level of optimization can then be achieved by monitoring short term trends in the data that can be triggered by external factors such as the economy or even the weather.

When all this data has been shared and built into the forecasting model, the VMI solution is ready to be made live. The platform then automatically takes all these data inputs and produces accurate recommendations to the supplier, who are then equipped to send stock at the optimal time.

Many of the largest retailers and manufacturers in the World use VMI to optimize their supply chains. This is because the increased sales that are achieved through such a solution easily outweigh any associated costs. While the increase in sales is an obvious outcome of having optimized stock levels on the shelves at all times, there are also some less obvious benefits.

Improved Inventory Turns

Another benefit realized through VMI is what is called improved “inventory turns”. This refers to stock turnover or the movement of stock, in other words, how many times a company has sold and replaced inventory during a given period. By having increased movement of stock, retailers can often free up warehouse space.

Improved Service

Lastly, by providing optimized deliveries, stock levels, turnover and ultimately sales, the knock-on effect is improved service levels and relationships with customers.

TrueCommerce uses standard business procedures and protocols to exchange data with suppliers and distributors. In general, we receive product activity data in the form of either EDI 852/INVRPT, XML, or a flat file from our customer’s distributors and generate a purchase order for delivery to our customers in either EDI 850/875/ORDERS or flat file format. We also receive certain inventory configuration files and master data extracts from suppliers and, if requested, send distributors a PO acknowledgment file on behalf of our customers. All of these transactions may be transported via AS2, FTP, VAN, or FTPS (FTP over SSH.)