We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » Time to reconsider VMI?
Perspective

Time to reconsider VMI?

December 16, 2011
James A. Cooke
No Comments

I first wrote about the concept of vendor-managed inventory (VMI) back in the 1980s. That original article described how a major U.S.-based snack-food company maintained its own inventory at each store operated by a well-known grocery chain. The snack-food manufacturer took responsibility for monitoring stock levels on the assumption that it was in its own interest to keep adequate stocks on the grocer's shelves and thereby minimize lost sales. Each day, therefore, a deliveryman would show up at the stores to restock the shelves and arrange the displayed items to catch the consumer's eye.

Since then, the practice of vendor-managed inventory has spread throughout the retail and grocery industries, and even into other sectors like the gasoline retail business. Moreover, most big-box retailers employ this practice with many of their key suppliers today.

But many consumer packaged goods (CPG) manufacturers now are starting to rethink the value of vendor-managed inventory. "I've been to probably 50 CPG companies in the last couple of years, and I cannot think of one that is interested in increasing its VMI base," Robert F. Byrne, chief executive officer of the software vendor Terra Technology, told me recently.

In fact, Byrne said, he knows of many companies that are cutting back on their use of VMI, and even of one multinational CPG company that's planning to stop rely on point-of-sale data to get a the practice altogether next year. Why the change? "The basic feeling is that VMI is too expensive [in comparison to] the benefits," he said.

A successful VMI program depends on accurate forecasts of consumer demand, which have proved elusive. Instead of vendor-managed inventory, most CPG manufacturers would rather clearer picture of what inventory should be on hand to meet demand. The demand signal or point-of-sale information gleaned from the cash register would drive replenishment as well as store-level inventory holdings. The adoption of this approach would allow for automatic replenishment of store merchandise— "something that never worked in VMI," Byrne said.

Vendor-managed inventory places the burden squarely on the manufacturer. As more manufacturers work to tighten up production and reduce their inventory holdings in these trying economic times, they will be looking for more help from their retailer customers... or at least more access to their data. It will be interesting to see to what extent retailers will be willing to share that data with their suppliers.

  • Related Articles

    Time to reconsider VMI?

    Time to go on the offensive

    wehkamp.nl takes it one day at a time

James A. Cooke is a supply chain software analyst. He was previously the editor of CSCMP's Supply Chain Quarterly and a staff writer for DC Velocity.

Recent Articles by James A. Cooke

Getting smart about using software intelligence

The payback challenge

A farewell, with thanks

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • Forecasts call for freight rate slumps in 2023

  • Projected U.S. recession in early 2023 will soften freight market

  • Inflation drops again as interest rate hikes hit home, NRF says

  • How to avoid the next crisis: A new approach to supply chain agility

  • New Jersey truck fleet says Freightliner tractors will deliver safety as well as freight

Featured Video

20221107korber large vs

Enhancing Customer Experience with Your Supply Chain Strategy

Viewer Contributed
With the rise of e-commerce, many businesses have had to transform their warehouses to handle online orders in addition to regularly scheduled inventory shipments. This means warehouses need more information than ever before to ensure they can meet customers' needs. As a result, companies need to select warehouse...

FEATURED WHITE PAPERS

  • Guide to Pallet Rack Safety

  • 3PLs: Complete Orders Faster with Flexible Automation

  • A shipper's guide to navigating post-pandemic holiday freight

  • THE NEW WAY TO WAREHOUSE: 4 Innovations in Automation & Robotics to Boost Warehouse Productivity

View More

Subscribe to Supply Chain Quarterly

Get Your Subscription
  • SUBSCRIBE
  • E-NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing