5 Ways Vendor-Managed Inventory (VMI) Benefits Manufacturers

The last thing manufacturers want to think about when making complex products with many intricate parts is how they will manage the inventory required to build their final assemblies. Vendor-managed inventory (VMI) becomes an essential benefit when producing complex machine assemblies. For decades machine shops have offered managed inventory to simplify the manufacturing and assembly process. Whether the end products are hydraulic manifolds, medical devices, or aviation engines, VMI provides many advantages.

Reduced Stockouts and Inventory Costs

Machines shops monitor manufacturers’ stock levels and replenish supplies once dropping to pre-specified levels. The key to monitoring success is regular and open lines of communication between the two parties. This is achieved through the following methods:

1. Good, old-fashioned phone calls, emails, and even plant visits
2. Automated inventory tracking systems for real-time monitoring
   • Typically, RFID technology achieves this function
   • Each item is tagged with a unique identifier, and automated alerts are received once inventory drops below specific levels
3. Remote monitoring via IoT devices using sensors to detect the inventory
4. Data sharing allows two platforms to continually communicate inventory, orders and shipping to trigger when additional stock parts are needed.

Machine shops help manufacturers reduce carrying costs by monitoring stock levels and avoiding tying up capital in excess inventory. Consignment inventory solutions deliver and replenish stock as needed by the manufacturer.

Improved Productivity and Efficiencies

Parts suppliers know that by integrating with a customer’s supply chain, they can better automate order placement, just-in-time inventory practices and coordination between other suppliers. Machine shops analyze usage patterns to predict external factors, inventory trends, bottlenecks, and overall supply chain efficiency. Forecasting for needs in the future drives improved plant operations. VMI creates better forecasts, which reduce lead times.

Reduced Administrative Costs

VMI eliminates dedicated inventory management teams who monitor inventory, order stock, reduce stock obsolescence, and minimize rush orders or expedited shipping. This allows in-house managers to focus on their core competencies. Over the long run, management improves the plant’s operations.

Flexibility in Manufacturing Schedules

Each manufacturer has different processes and needs based on economic and external factors. VMI services offer flexibility for manufacturers’ unique industry needs. Quickly adjusting to demand as it changes is vital to maintaining profitability. A well-integrated VMI program allows a company to change the manufacturing pace as the market heats up or cools down.

Overall, a machine shop’s managed inventory services offer the potential for improved customer satisfaction, cost savings, streamlined operations, and enhanced supply chain efficiency. Machine shops can become valuable partners in supporting their customers’ success by taking on inventory management responsibilities.