• Sun. Feb 25th, 2024

North East Connected

Hopping Across The North East From Hub To Hub

What is VMI And How Does It Work?

Companies in every industry are seeking ways to improve their manufacturing process and are looking to make things easier. With more time available to dedicate to the larger tasks of the company, instead of focusing on the menial processes which keep the company afloat, more brands can see greater profitability.

This is why outsourcing is such a great option for all kinds of businesses, and it can be done for a range of tasks. A VMI supply chain is one of the most effective forms of outsourcing, and it takes place within inventory management.

What Is VMI?

Vendor managed inventory (VMI) is a system that allows manufacturers to outsource inventory management to a third party. 

When a third party takes over this aspect of the business, manufacturing teams have more time to focus on other tasks, which can improve the profitability of the business. A VMI can take over the daily, necessary tasks such as sourcing materials and creating products which are vital to keeping the business afloat, while management can focus on larger, long-term goals.

Under this third-party supply chain management, the new vendor will take full responsibility for a range of tasks and will work to streamline the inventory process for the greater benefit of the company.

The third-party vendor will optimize and manage their client’s manufacturing process, working in various areas, including getting the right parts, fixings, consumables, sourcing material, and all other tasks that go into making the products and ensuring they are delivered to the right location on time.

What Are The Benefits Of A VMI?

Using a VMI supply chain can offer many benefits to all kinds of companies. Outsourcing this part of the manufacturing process can make things easier to complete, allowing the third-party vendor to streamline the process, which in turn can contribute to greater profits throughout the company.

Many companies are using a VMI chain for their manufacturing process and have experienced benefits such as:

  • Ensure a continuation of supply
  • Streamline the manufacturing process to make things easier, faster, and cheaper to complete
  • Ensure continued monitoring of stock usage, which can also allow for adjustments when necessary as a way to cut costs
  • Reduction of indirect and direct costs through process improvement, which is done by the third party evaluations
  • Free up valuable warehouse and storage space, as well as allowing for workforce to be relocated, which can save money
  • Guaranteed end to supply chain management

While many companies rely on a VMI to streamline and improve their manufacturing process, no two vendors work the same. This is because a VMI chain is tailored to fit the specific needs of the current client, allowing for specific issues to be resolved as this vendor works on real-time data from within the company.

By working directly with the company and its current processes, the third-party vendor you work with can provide specific and tailored solutions to issues which in turn can increase the businesses’ profitability.