Vendor Managed Inventory (VMI) is a process that is increasing in usage in our manufacturing sector. It consists of a supplier assuming full responsibility for maintaining adequate inventory of material at the customer’s location. This can be in a central storage location or at the point of production. The latter reduces one of the major causes of waste (MUDA), additional transportation and handling.
The goals of VMI include maintaining consistent product availability and reducing inventory in the supply chain. The end result is a reduction in overall cost.
It is very important to clarify the expectations for both parties and to foster communication of the goals and performance metrics. The customer’s responsibility is to alert the supplier to changes in demand as well as engineering changes that affect the products in the program.
Technology provides the opportunity to implement VMI cost effectively. Electronic ordering and bar code scanning are among the tools that can be used.
