Manufacturers are always looking for cost efficiencies to streamline operations and improve production. One of the key strategies to reduce costs is using Vendor Managed Inventory (VMI), where a supplier manages the inventory levels at your facility. Using VMI can significantly reduce disruptions in your supply chain by ensuring parts and components are always on hand, minimizing stockouts, and optimizing costs by stocking what you need when you need it.
How Vendor Managed Inventory Reduces Costs
There are many ways that VMI can help manufacturers reduce costs including:
- Lower Inventory Holding Costs: One main benefit of VMI is reducing your carrying costs. By allowing a vendor to manage stock levels, you can reduce excess inventory and maximize your warehouse space. This lowers costs for storage and insurance.
- Improved Cash Flow: You can avoid purchasing orders in bulk by using VMI, so smaller orders reduce your capital expenditures and improves cash flow so you can focus on other areas of production and new products.
- Reduced Downtime and Stockout Potential: production delays are an unfortunate and costly expense for manufacturers. Using VMI ensures inventory levels are exactly what you need to minimize any risk of a product or component shortage or production delay.
- Lower Procurement Costs: Automating your inventory process with VMI helps reduce the ordering and reordering that can often take too much time for your procurement team. Reducing the administrative work allows them to focus on more strategic initiatives.
- Optimized Supply Chain Efficiency: Working with your suppliers helps forecast demand and reduce supply chain challenges. With improved order accuracy, you can reduce lead times and the need for emergency shipments to save.
- Real-time Tracking: Using demand-based ordering and real-time tracking, VMI prevents over-stocking items that may go to waste if not used immediately. This also reduces the stock on items that may be phased out as a new product is launched.
Using VMI in your production facility is a great strategy to reduce costs, improve cash flow, and enhance the efficiencies in your supply chain. Working collaboratively with your suppliers can ensure production lines are not at risk, your teams are not stretched too thin with administrative tasks and also provides a scalable production environment. Gexpro Services designs custom VMI solutions based on your specific production needs, with many types of VMI services including Point-of-Use, Supermarket, and Forward Stocking Location options to maximize your assembly process. Talk to our team today about VMI solutions for your business