Is Vendor-Managed Inventory Right for You? Part 2
As discussed in Part 1, a VMI strategy is when a manufacturer allows a distributor like Hodell-Natco to manage the replenishment of their inventory. A Hodell-Natco VMI system has significant benefits including: streamlining material flow, eliminating non-value adding labor expenses, and putting an end to stock outs. But what does it take to actually implement a VMI? Often a manufacturer is fearful of change or how VMI implementation may hinder their production flow. Here’s an easy run-down of the steps involved.
- Establish expectations – First, your supplier (Hodell-Natco) seeks to understand the concerns that a manufacturer is having with their current inventory management system. Where can cost, time, or labor savings be realized? What’s a reasonable timeline for implementation? What does the manufacturer hope to accomplish with a VMI strategy? What are other special terms?
- Data collection/analysis – An in-depth analysis of a manufacturer’s inventory is conducted. Inventory samples are collected and verified. What inventory is active vs. slow-moving or obsolete? How frequently does inventory turn? Is there seasonality, job specific concerns, or identifiable usage patterns?
- Setting up a program – Inventory information is electronically integrated between the manufacturer and supplier, Hodell-Natco. Replenishment frequency periods and safety stock levels are established. The way material is to be stored and dispensed at a manufacturer’s facility is determined. Layouts, labeling, and invoicing procedures are established. Training is provided to the manufacturer’s employees who are involved with the VMI inventory. The good news is… this can almost always be done without delaying or shutting down production!
- Evaluation and modification – Once a VMI system is up and running, the most common cause of failure is a breakdown in communication. That’s why Hodell-Natco frequently evaluates our system and communicates with manufacturers to get feedback on our effectiveness. We can easily navigate ongoing production changes to a VMI system with sound communication.
- Seek ongoing value–added opportunities – Are there other areas can be consolidated to save the manufacturer time and money? Are there other non-standard, production-related items we can manage? Would kitting or assembly of parts provide additional time & labor savings?
As you can see, a thorough outline of expectations, an extensive inventory analysis, the use of the latest inventory-management technology combined with a systematic approach, can result in an effective VMI implementation without disturbing a manufacturer’s operations. Hodell-Natco’s ongoing ‘out-of-the-box’ thinking and constant communication help a manufacturer run a lean operation and realize long-term money savings.