{"id":14509,"date":"2022-07-11T06:13:17","date_gmt":"2022-07-11T13:13:17","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dcl-v3\/?p=14509"},"modified":"2024-01-02T09:21:10","modified_gmt":"2024-01-02T17:21:10","slug":"vendor-managed-inventory","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/fulfillment\/vendor-managed-inventory\/","title":{"rendered":"What is Vendor Managed Inventory (VMI) and What are the Benefits for an Ecommerce Business?"},"content":{"rendered":"

If your 3PL has a large storage capacity, you may consider using them to help store your inventory. This is what\u2019s known as vendor-managed inventory (VMI). It’s a value-added service that is more common for larger companies whose products are manufactured in another country.\u00a0<\/span>\u00a0<\/span><\/p>\n

Here are the ways VMI works and how it can be beneficial for an ecommerce brand.\u00a0<\/span>\u00a0<\/span><\/p>\n

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How Does Vendor Managed Inventory Work?\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

Instead of the merchant getting products from the manufacturer, storing them, then shipping them to a fulfillment company, products go straight from the manufacturer to the fulfillment center.\u00a0<\/span>\u00a0<\/span><\/p>\n

With VMI a brand will instruct their manufacturer (also known as a vendor) to ship products directly to their 3PL. Products are technically still owned by the manufacturer, so they will be shipped under the manufacturer\u2019s name. The merchant can then buy inventory as they need from the manufacturer, even though the products are already being stored by their 3PL.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Vendor managed inventory works the best for brands selling consumer packaged goods and other products that move through inventory quickly. Enterprise hardware, like security cameras or components for electronics, like cases and headsets, are other good candidates for VMI. The ideal scenario is to have products that won\u2019t sit in inventory for a long time.\u00a0<\/span>\u00a0<\/span><\/p>\n

How is VMI Different from Other Inventory Management Methods?\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

Inventory management is a big task for any ecommerce business. Any business can receive product from their manufacturer and put it in a storage unit, or house it at their business before shipping it to the fulfillment provider. This requires a complex system of tracking to ensure you know the exact product counts that you\u2019re storing, and that are with your 3PL.<\/span>\u00a0<\/span><\/p>\n

With VMI accurate inventory management gets a bit more complex but hopefully also a bit easier for the merchant to manage.\u00a0<\/span>\u00a0<\/span><\/p>\n

The accuracy and ease of tracking vendor managed inventory all depends on the fulfillment provider\u2019s (the vendor!) technical support\u2014with a great warehouse management system (WMS) inventory tracking can be very simple. All parties should be able to see inventory levels in real-time and adjust accordingly. By having your 3PL manage inventory, it can take the burden off the merchant to keep up with product levels in storage.\u00a0<\/span>\u00a0<\/span><\/p>\n

Considerations to make when choosing to have your 3PL manage your inventory:\u00a0<\/span>\u00a0<\/span><\/p>\n