Five Steps to Ensure Collaborative VMI Success

In a supply chain management software context, Vendor Managed Inventory (VMI) originally had a reputation of burdening the seller and benefiting the buyer. Fast forward to now: VMI has merged with Collaborative Planning, Forecasting and Replenishment (CPFR) to form Collaborative VMI, a new process that shares information and benefits across trading partners, using collaboration as the key to success.

The last few years have been challenging. The silver lining is that companies have been forced to re-evaluate how they operate, inspect every process and identify what and how to improve. The global economic downturn and the need for improved inventory visibility and efficiency has led to a recent resurgence in vendor managed inventory (VMI) programs. As a result, many companies have turned to a supply chain management software that allows closer collaboration with key partners as a way to improve efficiency, reduce costs and drive a more profitable supply chain.

VMI today is quite simply not the same as it was just a few years ago. It is no longer a one-sided process that burdens the seller and benefits only the buyer. In its early days, VMI was widely hyped to dramatically reduce inventories, cut costs and improve efficiency across the supply chain. It did accomplish its goal to reduce supply chain costs; however, its key hurdle and reason for the lack of continued support was the absence of true collaboration.

Today, we see the traditional data intensive VMI process merging with the best of Collaborative Planning, Forecasting and Replenishment (CPFR) to form Collaborative VMI, a new process which shares more of the benefits across trading partners. This white paper examines how traditional VMI and CPFR in a supply chain management software platform have come together to form a more encompassing process, ensuring that service levels remain high while inventory levels remain lean.