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Commons Myths About Vendor Managed Inventory

26 July 2016

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Myth #1:  VMI is Expensive

Fact:  Cost is relative – VMI might actually save you a lot of money.

What is the “true cost” of VMI? Let’s look at some data that shows the Total Acquisition Cost.

The costs of VMI (excluding transportation) only represent, on average, less than 1 percent. This is a relatively small amount considering additional services (forecast updates, coordination with OEM, ASNs, etc.) For a detailed explanation of the Total Cost of Acquisition, including real life customer examples, schedule a VMIQ class for your organization.


Myth #2:  VMI is hard to implement.

Fact:  SCSI’s expertise in the business makes implementation easy.

We only have six steps:six-steps-to-start-VMI

  1. Contact SCSI.
  2. We start the quote and get it to you within 24 hours.
  3. Identify all details and price.
  4. We submit the VMI price to you for decision.
  5. Over the next few weeks, we implement and train. We walk you through every step of the process and answer any questions you might have.
  6. The result is a managed and maximized efficiency of the supply chain.

We even make it easy to get started with a quote online.

Get a VMI Quote!

Myth #3:  VMI only benefits OEMs or suppliers – it’s not mutually beneficial.

Fact:  Each side benefits from proper VMI implementation.

Benefits for OEMs

  • Total cost of ownership visibility
  • Leverage LCC sourcing but keep local service
  • Reduce total inventory, but also OEM owned inventory
  • Reduce internal period and variable costs associated with planning, tracking, moving, storing, sqft, forklift trucks, racks, etc.
  • Optimize cash flow and leverage Operating Profit After Cost of Capital (OPACC or WACC)
  • Minimize pain of quality issues due to JIT batch sizes
  • Lean flow to present material “ideal state” to line (sequencing, Sub assembly, kitting, etc.)
  • Elevate supplier to the benchmark – the best in the world are on VMI!

Benefits for Suppliers

  • Enhanced customer support (quality, logistics, technical) using local support minimizing travel expenses and resources
  • Opportunity to add value or enhance product offering with localized sub-assembly, kitting, sequencing, returnable packaging,…to POU.
  • Secure LT business with enhanced value added proposition
  • Reduction of quality spills exposure by smaller JIT batch and local rapid response support
  • Reduction of inventory
  • Reduction to elimination of internal assets associated with storage (sqft, racks,…)
  • Leveling of production using pipeline inventory buffer
  • Position company toward benchmarks
  • Become low maintenance = better productive time with buyer = more business
  • View as a local presence = more business opportunity
  • Improve logistics & quality performance

Myth #4:  VMI does not comply with Sarbanes-Oxley.

Fact:  SCSI is Sarbanes-Oxley compliant and provides industry-leading reporting tools that increase visibility and transparency.

The Sarbanes-Oxley Act’s rules and regulations are intended to protect investors from the possibility of fraudulent accounting activities by corporations. Our proven processes have built-in checks and balances, and we support a solid corrective action process to continually improve. If you are a logistics customer with SCSI, you can have confidence that your assets are being reported accurately with the best processes in the business.

Test Your VMIQ

Test your smarts about VMI – then schedule a free private VMIQ class for you and your team.

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