VMI
Benefits for the receiver and the supplier
The Receivers benefit:
- They do not incur costs related to storage of pre-sales stock (order costs, housing costs, etc.)
- They purchase stock upon specific needs (actual production plan, customers’ orders, etc.)
- They can easily plan purchases basing on planned sales/production activity
- They get the necessary flexibility of performance, effectively transferring the commercial risk to the Supplier
- They reduce fixed costs, having only variable (operative) costs correlated with their commercial activity
The Suppliers also benefit:
- They receive liberty as per production planning, which allows them to reduce their costs (e.g. administrative costs)
- They reduce their shipment costs by acting on a DDU basis – sending big shipments at once
- They have a chance to manoeuvre the stock – in case of a greater number of Receivers
Mutual pricing agreements between the Receiver and the Supplier are of crucial importance – with VMI, both parties gain a wide spectrum of negotiation possibilities.