Vendor-managed inventory systems are common in many industries, from grocery stores to industrial businesses. If you want to learn more about these systems, you’ve come to the right place. We’ll explain how a vendor-managed inventory system gets started, its benefits, and more below.

How a VMI Works

Basically, a vendor-managed inventory (VMI) system is a business-to-business strategy that makes inventory management more efficient and strengthens the relationship between vendor and buyer. The vendor ships the stock to the buyer as they always would but uses sales data to observe and monitor sales patterns, using said data to replenish and adjust inventory stock as needed.

The restocking and adjustment of the inventory are completed entirely the vendor, with the vendor simply notifying the buyer when stock is in shipment or being ordered. It’s no different than a soda company sending its representatives to restock the shelves at a grocery store instead of the store employees doing it, as many grocery stores do.

Setting Up a VMI System

But how does a vendor-managed inventory system get started? To set up a VMI system, buyers must find a supplier that offers vendor-managed inventory services, like The Hose Shop.

Once a buyer finds a vendor, they’ll have an initial meeting where they can come to an agreement about the VMI system and details such as:

• What access the vendor will have to the buyer’s inventory
• Minimum and maximum stock levels
• How best to track stock performance and the success of the system
• Transaction costs

Once these basic system parameters are established, the vendor and supplier can get their VMI system up and running quickly with a basic schedule and set up sales data software monitoring.

Advantages of a VMI System for Businesses

VMI services have many advantages for businesses with extensive stock, the principal among them being the reduction of overhead and carrying costs. For businesses with huge stocks, managing everything requires a lot of manpower, and accruing unsold items can be a significant burden.

But with a VMI, buyers can minimize their overhead and risk since there’s less overhead and therefore risk to the business. The VMI ensures the shelves are stocked with products, orders are shipped out on time, and there’s not an excessive amount of unsold stock in the inventory. For businesses, this amounts to less of a headache and lower operating costs.

Conclusion

If your business sells custom industrial hoses and assemblies and wants to make your stock management more efficient, The Hose Shop can help. Contact our expert vendor management inventory team, and we can get started on making your inventory handling more efficient and less risky.