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Making a Vendor Managed Inventory Strategy Work for Your Company


11/19/14

Vendor Managed Inventory (VMI) programs can present an effective way for all parties in a supply chain to manage inventory needs. If handled correctly, VMI programs can lead to reduced risk, lower costs, and greater profitability.

An effectively managed VMI program offers increased visibility into a business’s supply chain and typically results in a better-managed inventory. VMI customers benefit from reduced administrative and personnel requirements and, in a consignment arrangement, realize freed-up capital that would otherwise be absorbed by inventory costs. VMI vendors benefit from being able to attract and retain long-term customers under contract, resulting in a steady and predictable flow of income.

Above all, both the customer and the vendor reap the benefits of increased profitability when a VMI arrangement is well executed. How? Primarily, a well-executed VMI arrangement results in lower inventory carrying costs, more effective inventory placement, fewer out-of-stock scenarios, and, oftentimes, joint decision-making regarding targeted sales-promotion activities that can help boost sales.

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This is the third article in a five-part series, “How Manufacturing and Wholesale Distribution Companies Can Maximize Performance and Profitability,” prepared by CohnReznick Advisory Group and the Firm’s Manufacturing and Wholesale Distribution Industry Practice.

Contact

For more information on VMI, please contact David Rubin, principal with CohnReznick Advisory Group, and National Director, Risk and Business Advisory, at david.rubin@cohnreznick.com or 973-871-4021, or Alan Wolfson, partner and Manufacturing and Wholesale Distribution Industry Practice Leader, at alan.wolfson@cohnreznick.com or 646-254-7416.

Previous Articles in the How Manufacturing and Wholesale Distribution Companies Can Maximize Performance and Profitability Series


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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