Advantages And Disadvantages Of VMI

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Introduction: Vendor Managed Inventory (VMI) is a business model where the buyer of a product provides information to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer 's consumption location. A third party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. Q1: For companies that outsource customer care to contact center vendors, one powerful way to ensure consistency is to build strategic relationships with a preferred set of vendors—essentially helping each one to operate as if it was an extension of the business. Crafting these strategic relationships requires…show more content…
There are a number of reasons why is it important to take a different approach to vendor management. For starters, when companies choose to outsource, they are entrusting their vendors with direct contact with their most precious asset: their customers. While not co-employees, vendors are still the face of the company and first point of contact for person-to-person interactions. Therefore, it is critical for companies to support vendors in providing the desired customer experience. The advantages of VMI The advantages of VMI vary widely from business to business. In general, businesses can enjoy the following benefits by switching to VMI: -A more efficient inventory management system: Few businesses are really good at inventory management. Outsourcing one part of inventory management to individual vendors can often be an effective way to avoid inventory problems. -More flexible to customer demands: If your customers seem to have weird ordering habits with little logic behind them, then VMI can help you handle “lumpy” demand cycles. -Reduce lost sales due to stockouts: Anytime a business is out of stock of a certain item, they may be losing money on missed sales of that item. VMI helps you avoid these situations and, in turn, can increase business…show more content…
This presents a host of benefits to a company, from reduced inventory carrying costs to a shortened supply chain. When managed well, this can reduce stock-outs and wasted product. But VMI carries potential disadvantages, as well. When a business relies on vendor-managed inventory, it 's placing a big bet on that company 's ability to deliver. The vendor has to be able to determine when to send new stock, what specific products to send and in what quantities. This can be beyond the means of a supplier that doesn 't have the software, infrastructure or expertise in place to make that work. If just-in-time inventory turns into way-too-late shipments thanks to poor demand forecasts or a supply-chain breakdown, VMI isn 't going to work. Even with return policies in effect, a business risks being taken advantage of by a supplier looking to make its numbers. For example, a vendor might ship an excessive amount of product at the end of the quarter and book it as revenue to boost its sales figures regardless of the customer 's needs. The customer may return the unneeded merchandise, but the vendor already has gotten what it wants out of the transaction. In addition, VMI may require a company to share sensitive information with the supplier, which can leave it in a delicate position

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