What is Vendor Managed Inventory (VMI) and How Does it Work?

As a manufacturer, depending on the size and complexity of your operations, managing your assembly components inventory can be complicated and challenging. As you seek ways to streamline your supply chain, improve efficiencies, and reduce costs, a popular strategy many manufacturers have adopted is Vendor Managed Inventory (VMI). But what exactly is VMI? How does it work?

What is Vendor Managed Inventory (VMI)?

Vendor Managed Inventory (VMI) is a supply chain management practice where the supplier takes responsibility for managing inventory levels at the customer’s location. The supplier handles all stock ordering, replenishment, and analysis by managing multiple vendor relationships on behalf of the customer.

In providing VMI services, AFC builds collaborative partnerships with our customers and ultimately makes their lives simpler.

How Does VMI Work?

AFC’s VMI implementation process typically looks like this:

1. Understand and Verify
   1. Quote Validation – Ensure AFC’s proposal aligns with the customer’s needs.
   2. Verify Customer Products – Verify customer part samples against drawings and descriptions to ensure accurate quoting.
   3. Program Proposal Development – Discovery meetings and plant tours help AFC develop the best solution proposal.
   4. Customer Acceptance – The customer has final approval on all proposal elements before implementation.
   5. GAP Analysis – GAP analysis allows AFC to anticipate potential implementation interruptions and explore alternate sourcing options to maintain a steady production flow.
2. Develop and Execute
   1. ERP Upload – Customer data and parts lists are uploaded into AFC’s ERP system.
   2. Develop Plans – Plans are developed for supply chain, operations, and quality control to ensure
   3. Verify New Products – Ensure newly sourced parts meet or exceed all quality requirements.
3. Installation and Training
   1. Program Installation – AFC will deliver, organize, and restock the program within an agreed upon time frame that minimizes production disruptions.
   2. Program Training – AFC will train the customer on the new program infrastructure and provide an overview of program requirements and processes.
   3. Establish Review Cadence – Regular strategic business reviews will follow a predetermined schedule and include the customer and AFC’s sales and operations teams.

Benefits of Vendor Managed Inventory

Implementing a VMI system offers several advantages, including reduced stockouts and overstocks, lower inventory costs, improved supply chain efficiency, and better customer satisfaction. With the right products available at the right time, our customers can meet their demands more effectively, leading to increased efficiency and better customer satisfaction.

Are you considering a fastener VMI program for your business? Let AFC evaluate your supply chain needs and explore VMI solutions that will work best for your business.