VMI system (Vendor Managed Inventory)
Vendor Managed Inventory (VMI in short) involves the management of a supplier’s warehouse stock. It constitutes a form of outsourcing the entire supply chain by manufacturing companies and is a holistic, innovative approach to the cooperation of three parties: manufacturing company, component supplier and logistics operator.
The nature of the process is that the component stock remains the property of the supplier but is controlled by the logistics operator. This happens at an optimal distance from the location of delivery to the recipient, namely the manufacturing or trading company. The main recipient does not incur any direct costs connected with handling and maintaining the stock. It can use the stock as necessary, buying only so much that it requires at a given moment.
Operating the VMI system is usually connected with opening a consignment warehouse and running an efficient customs clearance process.
Advantages for the recipient (manufacturing or trading company):
- easy purchase planning
- fast component purchase order lead time
- stock reduction (reduction of warehousing costs)
- minimisation of shortages of manufacturing resources
- flexibility of action and susceptibility to changes in manufacturing plans
- safety of the solution
Advantages for the supplier:
- lower freight costs thanks to shipping larger amounts of goods
- control over the stock until it leaves the warehouse
- ensuring higher flexibility of component delivery lead times
- minimising forecasting errors
- mutual pricing agreements between the recipient and the supplier – both parties obtain
- considerable room for manoeuvre during negotiations
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