Vendor Managed Inventory (VMI), Schneider Electric and Capital Tristate

Vendor Managed Inventory, VMI, a service of Datalliance, is touted by many as a tool to improve their inventory management, improve purchasing productivity, ensure quick access to new products and as a vehicle to improve the profitability of specific lines.  The challenge for many distributors, however, is either culturally (perceptual reluctance to give up “control”), trust with the participating manufacturers or the stock volume needed, per reporting location, to participate.

However, many leading distributors have partnered with key suppliers and are engaged in VMI relationships … and profitable.

On Thursday, April 6th, Datalliance is hosting a VMI discussion and showcasing the success that CapitalTristate, a Sonepar company, has had with Schneider Electric.  The “challenge” is that both are large companies and frequently independent distributors do not feel that they have the “resources” of a national chain. This is an opportunity to learn more about VMI and how it can save costs and improve profitability.

So, we asked Datalliance for more input and asked if they were going to address key questions that we have heard from distributors. Their response:

We get several questions repeatedly from distributors and suppliers around VMI – Is it right for me? How much product do we have to buy? Can I trust my trading partner? Do we still have say in what products are stocked? What are the benefits? These are great questions and, of course, exist because each company is making a commitment when agreeing to participate in VMI. Our suggestion? Ask around. Ask a distributor that is currently doing VMI with a supplier for their thoughts. Are they happy with the partnership? Or better yet, do they feel like they are a partner in the relationship? When it comes to benefits the chart below helps to explain some of the common ways VMI helps both suppliers and distributors.

How the VMI Technology Platform Enhances Profitability

For Suppliers

• Ship needed products; reduce returns
• Demand estimation produces right-size orders
• Fewer rush orders
• Stabilize production output
• Less time spent fixing orders
• Opportunities to sell additional products
• Fuller trucks; reduce transportation costs Distributors

For Distributors

• Receive products that will sell
• Less wasted warehouse space
• Higher in-stock percentages
• Predictable shipments
• Less time spent ordering
• More time spent optimizing product offerings
• Less dock congestion

According to the webinar’s overview, attendees will learn how manufacturers select distributors to participate in a VMI program, why VMI makes a manufacturer invested in a distributor’s success, and who really wins after VMI is implemented.

Register here.  Note:  The webinar is (was) Thursday, April 6th at 2:00 pm EDT.   Here is a link to a recording of the webinar.)

One thing that we’ve learned about VMI over the years is that this is either a distributor-led initiative or a manufacturer (factory)-led initiative.  Distributor salespeople / reps rarely get involved in the education / solicitation process, probably because it can become very detailed and involves some level of manufacturer financial investment (not just time.)

And if you are a “smaller” distributor or a small location and your company isn’t due VMI, you may want to ask how you can learn more and if you are being put at a competitive disadvantage … higher inventory management costs, less turns, more obsolete material, different policies, different access to new products, etc.  Perhaps there could be opportunities by further partnering with some of the participating suppliers?

If your company is using VMI, what has your experienced been?

If you attend, be sure to come back and leave a reply with your thoughts on the webinar. We would welcome your insights on how, or if, the information answered of your questions.