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Vendor Managed Inventory Done Right

Posted by Kimball Midwest on May 18, 2018

Tags: MRO, Vendor Managed Inventory, Inventory

 
We have a few questions for you, but be warned: depending on how organized your shop is, they might be painful to answer.

Ready? Here goes:
  1. How much time do you and your team spend searching for needed items you think you have on hand?
  2. How many trips do you make to go get parts?
  3. How much excess inventory do you have on hand; items collecting dust that you won’t realistically need for months or maybe even years?
If your honest answer to one or more of these questions was something along the lines of “too much,” vendor managed inventory (VMI) might be a great solution to help improve your shop’s efficiency and profitability.

What is VMI?

Rather than ordering products or supplies for your business when you realize you need them, under VMI your business allows a trusted partner to monitor inventory levels and ensure timely and adequate resupply.

What are some of the advantages of VMI?

Is your shop cluttered with parts that haven’t been used in recent memory? Do you have dozens of a part you only need a few times per year? If so, VMI can help.

Once your vendor gets to know your operation, these are the kinds of things that can be resolved easily with VMI. Eliminating obsolete inventory and setting and maintaining appropriate inventory levels are key features of this kind of partnership.

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VMI also can help if you’re tired of running out of items unexpectedly. Your vendor can learn your shop’s usage patterns and all but eliminate those unexpected out-of-stock situations that zap productivity and profitability.
These are just a couple of the ways VMI can enhance efficiency for your shop. The savings can be substantial when you eliminate the hidden costs of disorderly inventory, equipment downtime, restocking time, procurement time, issuing purchase orders, receiving orders, emergency pickups, and more.

How much does VMI cost?

You might pay a slight premium to a VMI vendor, but in return you get attentive service as well as potentially significant savings from increased productivity and reduced downtime.

When your VMI vendor provides exceptional service, you can count on having the materials you need on hand when you need them. This means less wasted time searching for misplaced inventory, not to mention sourcing and obtaining needed items. You’re also less likely to have unplanned downtime because of a key missing part or piece of equipment that’s out of commission waiting to be repaired.

How does a shop transition to a VMI arrangement?

Once you’ve selected a VMI vendor, the first step is getting to know each other and communicating needs and requirements, such as minimum inventory levels and usage rates. Every shop is different, so this familiarization is vital.

If you don’t already have an efficient setup for storing the supplies to be managed, designing an effective solution for organization is the next step.

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Once you are comfortable with the plan, a timeline is established for transitioning, usually including one or more days to set up any new storage equipment needed.

Then, it’s just a matter of ongoing service and communication to ensure your shop is reaping all the benefits of the new VMI relationship going forward.
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