Lowering Vendor Managed Inventory Costs

warehouse inventory

One of the surest ways to reduce your company’s inventory costs is to use a vendor managed inventory agreement. Success or failure with these agreements is dependent upon strong cohesion between your purchasing department and its vendor base. Delays are commonplace and manageable, but inaccurate information is much more costly and far more damaging. As such, many of today’s enterprises are upgrading their enterprise mobility network with rugged handheld computers, and they’re giving these computers to a purchasing department that must manage an ever-expanding vendor base.

These rugged mobile computers not only allow procurement professionals to better coordinate incoming shipments, but they empower them to improve how their vendor managed inventory agreements are structured. Now, the question you must answer is how do your current manual processes compare? More importantly, could your manual processes ever duplicate the accuracy of a mobile device? To answer both of these questions, we’ll review the fundamentals of a vendor managed inventory agreement. Next, we’ll outline why your manual processes will never allow your company to achieve significant inventory cost reductions.

Benefiting From Vendor Managed Inventory Agreements

A vendor managed inventory agreement allows your vendor to become a proactive participant in lowering your company’s inventory carrying charges. The first type of agreement includes your vendor holding a portion of your company’s inventory at their location. Your company decides how much is shipped and when, based on a forecast provided to your vendor. You only take what you need in the month you need it. Another version of vendor managed inventory is called a consignment inventory agreement. With this type of agreement, your vendor ships one large sum of finished product to your location, well in advance of any future requirement. Your company is only invoiced for what it uses in the month it uses it. This type of agreement reduces your incoming freight costs because you’re only concerned with the invoice for the current month’s usage. Both of these types of agreements reduce your carrying charges, while giving your vendor the piece of mind that comes from consistent business volumes.

Enterprise Mobility Solutions Are Essential

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