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Vendor Managed Inventory; What is it and what benefits can it bring to you



Numerous manufacturing companies with a vast inventory of C-parts often rely on vendor-managed inventory (VMI) solutions. Under this system, the supplier assumes some or all the responsibility for ordering, managing, and replenishing the parts. VMI solutions offer a variety of benefits to purchasers, including enhanced data insights and reduced time spent on repetitive tasks.


However, there may be some confusion about the definition of VMI and how to implement it efficiently. This article will clarify what VMI truly means and explain why it should interest all purchasers grappling with a lack of time or information.



So, what is VMI?

Two distinct types of Vendor Managed Inventory (VMI) solutions exist that businesses can use to manage their inventory. The first type is 'full' VMI, which involves the supplier managing and replenishing the parts and owning all the components. In this scenario, the customer pays for the management services and the C-parts as they are consumed.


The second and more commonly used VMI solution allows the customer to maintain inventory ownership while the supplier provides management solutions to maintain the desired stock level. Both solutions rely on logistics to track stock levels and place orders appropriately to maintain availability at a minimal cost.


The quantity of C-parts in a VMI solution can differ depending on the manufacturer and production process. While some prefer to delegate responsibility for all components utilized to the supplier, others limit this to the most frequently used parts, typically the top 20 percent of parts that account for 80 percent of total usage on the production line. This underscores the fact that VMI is not a one-size-fits-all solution but a system that can be customized to address the unique needs and challenges of each manufacturer and their industry.


Maintaining an accurate and current inventory is crucial to efficiently managing parts supply. By integrating a digital inventory system with real-time data from the production line, one can ensure the accuracy of inventory records. This simplifies keeping necessary parts in stock, minimizing the risk of production delays.


For suppliers looking to manage the restocking of a customer's parts supply, tracking C-part usage is essential. Various logistics solutions are available, each tailored to different environments and operating procedures. However, they all facilitate monitoring C-part usage and centralisation of data in a system that provides inventory availability information. This enables automated orders to be generated when restocking is required, streamlining replenishment.



Various VMI Systems

While other solutions exist, here are three more common solutions where manufacturers use one or a combination to suit different parts of their operation.


Scanning

Efficient management of C-parts necessitates utilizing specialized systems that employ various technologies. One such method involves the storage of parts in labeled bins that are marked with a barcode. As parts are removed, an operator uses a handheld scanner to scan the empty bin's code, updating the central system to reflect the new number of available parts. This automated process also initiates an order for restocking the depleted inventory.


Weighing

Alternatively, using scales to weigh the parts bin can also aid in managing C-parts. As parts are removed from the bin, the bin's weight reduces, and the system is automatically updated with the remaining remaining number of parts. A camera can also perform a similar but less accurate function. Regardless, these technological solutions provide real-time information on the availability of parts, enabling efficient and precise tracking.


RFID

An effective RFID solution can also be utilized in C-part management. This method provides parts bins with RFID tags that enable automated tracking and management. When a bin is emptied, it is removed from the shelf, and the RFID tag is detected when the bin is moved. The system automatically updates the relevant information, allowing for seamless and accurate inventory management.


The constant updating of information these systems provide enables automated orders to be placed at the right time, ensuring a timely and efficient supply of parts. This translates to minimal effort from the manufacturer while enabling the supplier to deliver the needed parts promptly.



The Benefits of Vendor-Managed Inventory


Time savings

If you are using a manual ordering process, ensuring the safety of your stock levels can be a time-consuming affair. The ordering of all the components in your inventory can quickly mount up, leading to a significant investment of time. By automating the process through VMI solutions, you can eliminate this manual work, thus freeing up more time to devote to critical matters such as planning, negotiation, and building relationships with your supply chain partners.


Increased Security

A digital stock list updated with physical input from the production line gives you an accurate picture of your inventory, making it easier to ensure that the required parts are always in stock. This minimizes the risk of errors and downtime due to missed orders or inaccurate inventory information.


Real-time data

With this solution, an operations manager or purchaser can check the system and feel confident that the figures they're looking at are accurate. The system provides real-time insights into stock levels, not just how they appeared the day before. This accuracy provides confidence and reduces the risk of downtime. The data can also be used to gain insights into usage patterns for better-informed purchasing or production decisions.


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Hopefully, this article will give you a steady foundation in your understanding around Vendor-Managed Inventory and your potential options. If you want to learn more, drop us a quick email at sales@kiansoon.com.sg


Make sure to also take a look at a few of our other articles on the site:


Original article adapted from parent company - Bufab



About Kian Soon Mechanical Components


Kian Soon Mechanical Components was founded in 1977 and is one of South-East Asia's leading distributors of C parts. Aside from its head office in Singapore, the company also has subsidiaries in Malaysia, Indonesia, and Thailand. The company was acquired by Bufab in 2017.


For more information, publication, and other queries, don't hesitate to get in touch with us at sales@kiansoon.com.sg



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