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Vendor Managed Inventory...Is this really something I ought to look into?

Well of course you should, but ONLY if you want:

  • To reduce your parts inventory carrying costs (sometimes dramatically)
  • Your technicians pulling wrenches instead of trying to run a store
  • To reduce or eliminate your inventory “shrinkage”
  • Accurate inventory records
  • To reduce stock-out occurrences
  • To purchase from a parts dealer-consigned inventory at your location
  • No-hassle parts warranty management
  • No hassle core management
  • Quality parts at competitive parts costs
  • Easy return of excess and/or obsolete inventory
  • And the list goes on!

I’m thinking that, by now, you kind of get the idea. Investing in a spare parts inventory is not only costly, it can be a big headache.

So, what happens with VMI…how does it work?

Vendor Managed inventory can take many forms to fit your needs and preferences. It’s really a departure from the way buyers and sellers of truck and bus parts have related in the past. In the past, you probably wouldn’t have dreamed of telling a parts sales person the details of who you bought from, in what quantities, at what cost and under what terms. That was private information. You may have used that mystery to have bargained for a better price or better terms or something better. Your job was to gain the upper hand on your supplier. You and your supplier were almost adversaries.

With VMI, that’s all changed. Your supplier is now on your team. In return for all of the benefits your supplier gets, you get everything you want (refer to the list above). You now get to do what you do best as you take good care of your fleet and your parts supplier gets to do what he does best in supplying and managing an inventory of parts.

And what does your parts supplier get out of this symbiotic relationship? He becomes your primary source for all of your parts needs while he’s solving a lot of your headaches. He gets to earn your business and sell you more parts. It’s a beautiful thing! It really works and it really is a Win/Win.

There are several VMI strategies from which to choose allowing you to find one that is suitable solution to both the supplier and customer.

  1. Consignment Inventory Management – the vendor owns the inventory stock located on the customer premises. The customer is charged as the parts are used.
  2. A vendor employee is placed at the customer facility to manage the inventory on the customer premises.
  3. Vendor tracks parts usage, on hand levels and orders parts to replenish customer parts stock. Customer owns the stock and provides the space for the inventory.
  4. Customer manages, owns and stocks inventory but vendor places all part orders as a service to the customer.

Whichever option is used, the end results will be beneficial to both customer and supplier.