Vendor Managed Inventory
An industrial valve manufacturer was struggling to align its network of more than 50 suppliers; each supplier differed in lead time, receiving time, and responsiveness, which left the manufacturer constantly sorting through disjointed paper trails and accounts payable work.
In order to solve these issues and consolidate all of the supplier information into one unified system, the manufacturer approached Assembly Fasteners Inc. (AFI) for a solution. With over 30 years of distribution service experience, AFI was able to suggest a Vendor Managed Inventory (VMI) partnership.
What is VMI?
VMI is a lean supply chain process in which the vendor or supplier manages the manufacturer’s inventory. In this process, the distributor sends the manufacturer automatic updates about inventory changes, allowing the manufacturer to determine when to generate new purchase orders.
Modern technology has led to rapid advancement of existing VMI programs. Smart weight-sensing bins and cloud based inventory tracking software, for example, eliminate human error by removing the need for any manual counting or data entry.
AFI is proud to introduce AVIS – Assembly Virtual Inventory System. This smart, weight-based inventory system uses SmartBins to automatically calculate the number of parts in a bin and determine the number of new parts that will be needed to refill it. This information is stored in a cloud data collection system, which monitors all inventory and generates automatic alerts for stock replenishment orders.
How can VMI Benefit You?
The shared risk and investment of a VMI partnership creates a mutually beneficial relationship between manufacturer and distributor through a deeper integration and better understanding of one another’s business. VMI correspondence strengthens the manufacturer-distributor business partnership by eliminating a human element to the day-to-day tasks for each company.
Additional Benefits of VMI include:
- Reduced inventory investment – Automatic, real time inventory updates eliminate the need to stock back up inventory, in addition to reducing the risk of stock-outs and rushed emergency orders
- Adjustment to market demand - As the supplier becomes more integrated into the manufacturing process, it can adjust inventory supply based on market demand for the final product
- Transition to a paperless system – Scheduling, ordering, and accounts payable functions can all go into a monthly transaction statement, eliminating the need to keep track of a stack of invoices
- Improving inventory management – Automatic VMI updates reduce human error and wasted time during inventory cycles that typically require manual counting, barcode scanning, and data entry
- ERP Integration – VMI programs are now so technologically advanced that they can seamlessly integrate into companies’ existing Enterprise Resource Planning (ERP) databases, thus consolidating all of a business’ information into one unified system
The AFI Solution
By aligning goals and expectations during recurring meetings with the client, AFI helped its VMI partner to consolidate the supply chain and begin the transition of supplier information management to the AFI implementation team. AFI took the place of many of the suppliers so that the VMI partner was no longer responsible for chasing down multiple parts and purchase orders.
With all of the valve parts managed by an on-site AFI representative and readily available in one place, the customer avoided stock-outs, eliminated emergency orders, and saved money lost on back-up stock. With the time and resource savings from the VMI partnership, the customer was able to reallocate funding and employees into other functions of the business.
As the VMI relationship grows, the partner has continued giving AFI more responsibility and autonomy over inventory and management of new production centers. The VMI partner still meets with AFI regularly to discuss goals and upcoming market demand.
For more information about AFI and our custom VMI solutions, please contact us today.