Vendor Managed Inventory VMI
Contents |
[edit] Introduction
Vendor Managed Inventory (VMI) is a business model in which an organisation sets up an arrangement with a vendor and the vendor not only supplies goods but also manages and optimises the inventory from various distributors.
[edit] Establishing the relationship
This arrangement allows the organisation to delegate responsibilities associated with procurement and supply chain management to a third party service provider. This service may be handled by a vendor that provides parts, equipment and maintenance, repair and operations (MRO) materials. By being relieved of certain activities, a company is able to focus on its core competencies and forward planning activities while asking its service provider to enhance value chain engagement.
A Vendor Managed Inventory (VMI) arrangement is sometimes used by small to medium sized businesses that do not have the in-house expertise to manage supply chain logistics or the space to maintain stock. The arrangement relies on clear communication between the organisation and the vendor in order to ensure proper inventory levels are available.
Some vendors provide the warehousing facilities for materials. Others manage inventory in space that is located directly on the organisation’s premises.
[edit] Advantages and disadvantages
Vendor Inventory Management is a form of business process outsourcing (BPO). As with many outsourcing arrangements, both the organisation and the service provider are exposed to some degree of risk. The parties become dependent on one another for success and this requires a change in culture, attitude and procedures throughout the supply chain.
For the customer, the benefits can include:
- Staff are free to focus on core competency areas.
- Inventory levels can be monitored and managed efficiently.
- Supply chains can be managed in an expert and proactive manner.
- It gives the client the opportunity to learn about inventory management best practices from the vendor.
Customer disadvantages can include:
- Reliance on a relationship that may be vulnerable to external factors.
- Less control over inventory issues.
- Possible security concerns over proprietary information associated with the organisation.
- The potential to lose the advantages of open competition from suppliers.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
ECA Industry Awards 2024 shortlist revealed
22 leading businesses from across the electrotechnical and engineering services sector.
Government unveils Skills England strategy
Skills England to transform opportunities and drive growth.
New Government Hub for York Given Planning Green Light
For up to 2,600 civil servants, due for completion by 2028.
Construction Skills Certification Scheme cards
July update on Professionally Qualified and Academically Qualified Person Cards.
BSRIA Briefing 2024, November 22
Sustainable Futures: Redefining Retrofit for Net Zero Living.
The CLC on driving competency in the retrofit sector
Previously published roadmap on skills for net zero.
The first labour government King's speech in fifteen years
Construction industry reactions, support and some concern.
CIOB Retrofit of Buildings Technical Information Sheet
What retrofit is, the approach to be taken and processes to be followed.
Adapting Historic Buildings for Energy and Carbon Efficiency
Historic England advice note 18, free download published.
10 retrofit projects revisited 10 years after completion.
Information orders, building liability orders and SPVs
Key BSA terms and how they impact special purpose vehicles.
Listed despite problems with its design.
Zen and the art of cycling exploration.
Design Council Homes Taskforce launched
To support government 1.5 million homes target within UK climate commitments.