What is VMI? How vendor managed inventory works

You regularly purchase the same materials from the same supplier. Yet you still check what you have in stock, determine what needs to be ordered, and then place the order yourself.

But why?

Your supplier knows the products, knows what they can deliver, and will ultimately receive your order anyway. With Vendor Managed Inventory, or VMI for short, you therefore turn part of the process around: your supplier helps you keep your inventory at the right level.

This can save you time and effort while also giving your supplier a completely different role.

What is Vendor Managed Inventory?

With Vendor Managed Inventory, a supplier takes on a role in managing their customer's inventory.

The extent of that role does not have to be the same for every partnership.

One customer may mainly want a supplier to have visibility into inventory and advise when replenishment is needed. Another customer may want the supplier to actively help with ordering or replenishing stock on site.

VMI is therefore not one fixed way of working. Together, you agree who is responsible for what.

The basic principle remains the same: as a customer, you no longer have to independently monitor when materials need to be replenished.

From supplier to inventory partner

Normally, an order starts with you.

You notice that something is almost out of stock, determine how much you need, and place the order. The supplier only comes into the picture after you have taken action.

With VMI, this can happen earlier.

With BarTrack, a connected supplier or wholesaler can be involved in managing their customer's inventory. Depending on the agreements made, the supplier can, for example, help set up ordering parameters, monitor inventory levels, and ensure that materials are replenished on time.

This changes the relationship.

Your supplier does not just deliver what you order, but also helps ensure that you have access to what you need.

How do you know when something needs to be replenished?

VMI only works well when there is sufficient visibility into the current inventory.

There are several ways to achieve this.

For example, you can register material withdrawals as they occur. But this is not necessary or desirable in every environment. In a practice or supply cabinet with many consumables, it may be more practical to check or scan the inventory at a set time.

A 2-bin system can also be used. As soon as the first bin is empty, this serves as the signal for replenishment, while work can continue from the second bin.

The best method therefore depends on the type of inventory and how the materials are used.

The goal is not to register as much as possible. The goal is to make it clear when replenishment is needed.

Minimum and maximum levels provide guidance

Minimum and maximum stock levels can help provide guidance.

You agree in advance on the minimum quantity of an item you want to have available and what level of stock is appropriate. If usage changes, these settings can be adjusted.

This is important because effective VMI inventory is not static.

Perhaps the usage of a particular item increases. Maybe another product is hardly used anymore. When the customer and supplier have this insight, the inventory can be adjusted accordingly.

This not only helps prevent shortages but also makes it clear which materials consistently remain in stock.

Replacement items can also be part of the process

A supplier also has knowledge that you, as a customer, may not always have yourself.

For example, an item may be replaced by a new product or temporarily become unavailable. As part of the collaboration, a supplier can help manage a suitable replacement item.

This means VMI goes beyond simply asking: how many are left?

The supplier's product knowledge becomes part of the inventory process. Especially when dealing with large quantities of consumables, this can save the customer a lot of time and effort.

What does VMI offer you as a customer?

The most noticeable benefit is time.

You don't have to check as often which items are running low, compile order lists, or take separate action to replenish recurring items.

But availability is just as important.

When inventory is monitored consistently, there is less chance that you only discover something is missing when you need it.

This can be relevant in a dental practice or healthcare environment, but equally in manufacturing, industry, a warehouse, or another organization where consumables are needed on a daily basis.

You spend less time on the ordering process while still maintaining visibility into your inventory.

And what does it offer the supplier?

VMI is not just a service provided to the customer.

For a supplier, it can be a way to strengthen the customer relationship. Instead of waiting for the next individual order, the supplier becomes part of the inventory process.

This provides greater insight into the customer's needs and makes recurring orders more predictable.

In addition, the supplier's share of a customer's total purchasing volume may increase. When you, as a supplier, take responsibility for an assortment and ensure that it remains readily available, it becomes more logical for the customer to fulfil more of that recurring demand through you.

You are then not only competing on price or on how easy it is for someone to place an order in your webshop.

You offer a service that genuinely takes work off the customer's hands.

VMI doesn't have to be fully automated right away

The step towards Vendor Managed Inventory does not have to mean giving up full control over your inventory either.

You can start small.

For example, with one product group, one stock cabinet, or a selection of frequently used consumables. First, the supplier can monitor the inventory and provide advice. Later, you can decide to hand over more parts of the ordering or replenishment process.

This allows you to determine together which form of VMI suits the organization.

The most important thing is that both the customer and supplier have visibility and make clear agreements about who checks, who orders, and who replenishes.

Preventing an order is sometimes better service than receiving one

For suppliers, this may be the biggest change.

Traditionally, much of the focus is on making ordering as easy as possible. A good webshop, fast order processing, and smooth delivery remain important, of course.

But the best order for your customer can also be one they no longer have to think about themselves.

When you, as a supplier, help determine what is needed and when it should be replenished, you are not just selling materials. You are helping organize a process.

And that is precisely how VMI can turn a supplier into an inventory partner.

In short

Vendor Managed Inventory (VMI) means that a supplier takes over part of their customer's inventory management. How far this goes is determined together: from monitoring and providing advice to placing orders and actually replenishing stock.

With BarTrack, connected suppliers and wholesalers can help customers keep their inventory at the right level. For the customer, this means spending less time checking and ordering and having greater certainty about availability. For the supplier, it offers the opportunity to provide more service, strengthen the customer relationship, and become a larger part of the purchasing process.

This changes the relationship from delivering what a customer orders to ensuring that a customer has what they need.