Securing A Vendor Managed Inventory Deal

Traditional inventory management makes you choose between stock-outs and overstocks. This leads to an unhappy retailer, because they either have excess inventory they are unable to move, or too little inventory and are missing out on sales. Either way, you lose money as the supplier.

The solution is Vendor Managed Inventory.

Vendor Managed Inventory (VMI) means the vendor manages the inventory in the store and is often more effective. The buyer sets a designated inventory amount that the supplier will maintain, and the vendor takes complete responsibility for managing the retailer’s inventory and will start to ship materials as needed. The goal of VMI is to align the company’s business objectives and streamline the supply chain process for both the supplier and retailer.

Here’s a few benefits that come with a VMI deal:

Vendor-Oriented Management

With access to POS data, vendors are able to ship out the exact amount of products to retailers exactly need when they need it. Instead of large shipments, vendors are able to ship smaller batches to their retailers, thus reducing costs. Retailers typically have their plate full with countless other things, and turning inventory management over to a vendor usually results in a drastic improvement in incremental sales.

Improved Buyer-Supplier Relationship

If VMI is successful, it fosters a greater relationship between you and your buyer. When you can show factual data and explain your reasoning or strategy to your buyer, it’ll dramatically change how they interact with you. As the supplier you will now be in the driver’s seat going forward, because the buyer will rely on your expertise and take your advice on how to proceed.

However, none of these benefits are possible without a point-of-sale data analysis platform to drive your decisions. As a supplier, you need a system like krunchbox that will analyze your inventory levels and monitor any trends to help you make better VMI decisions.

How do you secure a VMI deal?


1. Share the Benefits of VMI

Explain to your buyer the benefits that come with implementing VMI. Show them practical ways it will change their current inventory management process. It has the ability to reduce inventory levels as they will start to order smaller batches and carry less product at a time.

A major selling point is that products move more efficiently throughout the supply chain. They will only carry what they can sell and thus stockouts and overstocks are dramatically reduced. It will also shift the responsibility from them to you, the supplier, and in turn create less stress for them. Changing the responsibility of inventory will also build a sense of partnership between the supplier and retailer — a collaborative effort will be necessary to successfully manage inventory.

2. Showcase Your Abilities

Show how you are capable of improving their current inventory process. What are ways that you as the supplier can provide data-driven results to help them run more efficiently? Explain how you can help them analyze their POS data to make better decisions to improve their bottom line. Share the platform you use to analyze POS data. Platforms like Krunchbox can generate complex recommendations down to specific SKUs or location. POS data analysis platforms can also give you feedback that you can take into meetings with your buyer and show important data to back your strategy.

3. Execute the Deal

Don’t let it fall through. Be proactive about how you approach them, reevaluate and suggest new ideas. Maybe offer different product options for your retailer based on the POS data, or remove a product from their business if it does not perform well in their region. Always find ways to keep the vendor-retailer relationship moving forward and the retailer will appreciate the fact that you have their best interest in mind.

If you are a vendor seeking a platform to analyze POS data, you can learn more about krunchbox here. For those vendors who are ready to sign up for a free demo with your own POS data sign up here.