Vendor-Managed Inventory Benefits

May 8, 2020

Boxes ready for delivery in a warehouse

Vendor-managed inventory (VMI) is widely used in the packaging industry to help customers streamline operations and reduce costs associated with the procurement and storage of packaging materials. GWC Packaging has years of experience delivering vendor-managed inventory benefits to our customers. We highly recommend a VMI program if you haven’t yet looked into it.

What Is Vendor-Managed Inventory? 

VMI assigns responsibility to the packaging supplier for tracking and replenishing the customer’s inventory purchased from that supplier. Important activities overseen by the supplier include: 

  • Establishing minimum and maximum inventory levels for each SKU
  • Conducting on-site and/or remote inventory on a regular schedule
  • Generating inventory replenishment orders based on inventory counts 

VMI requires close collaboration between customer and supplier. The supplier will need access to the customer warehouse to conduct inventories and inspect materials — activities typically done weekly or monthly.

In addition, customer and supplier often integrate (or sometimes even share) inventory management and other supply chain-related software to streamline procurement, improve reporting accuracy and reduce errors.

Finally, it’s important to know that you, the customer, maintain ultimate control of how the VMI program is structured, and review performance with the supplier as often and formally as desired. 

Important Vendor-Managed Inventory Benefits

GWC Packaging provides a variety of inventory management services to our customers. Because we work closely with the manufacturers we represent and offer such a broad line of packaging materials, we have the ability to efficiently and comprehensively implement and oversee a VMI program.

Vendor-managed inventory has significant advantages for manufacturing and distribution operations of all size: 

  • Less risk of stock-outs: Packaging items, including corrugated boxes, have continually changing lead times due to market conditions, availability of raw materials and many other factors. Taking these changes into account is a lot to keep track of for an end user. GWC Packaging has intimate and up-to-date knowledge of lead times, and is able to take this information into account when generating replenishment orders.
  • Streamlined procurement: Considering the issue we just mentioned — along with other activities such as taking inventory, creating orders and running inventory reports — you can see how much work is taken off the plate of the customer. This enables you to put more focus on other inventory and purchasing issues and challenges.
  • Lower inventory levels: While vendor-managed inventory is not the same as just-in-time delivery, VMI programs tend to work best with smaller and more frequent deliveries. This results in lower inventory levels, freeing warehouse space and improving cash flow. Space reduction is a major benefit of VMI for packaging products.
  • Improved secondary packaging efficiency: VMI is not only about mechanics, it also enables us to advise you immediately of obsolete or less-efficient SKUs and alternate items that will reduce material costs, enhance packaging quality, improve ergonomics and so forth. Because VMI gives us a deep understanding of your inventory costs and how products are used, we can pinpoint the best product improvements and accurately quantify their value to you. 

What Businesses Benefit From VMI?

VMI programs deliver enormous benefits to any manufacturing or distribution operation, especially those having: 

  • Limited human resources for internal management of inventory and procurement
  • A large number of packaging SKUs
  • Rapid and/or continually changing usage of packaging SKUs
  • Reduction/elimination of stock-outs
  • Limited storage space
  • A need to reduce the cost of procurement and carrying cost of inventory 

Learn More

If you would like to learn more or discuss the potential for VMI in your operation, please contact us now.