In any type of business with a high rate of inventory and on-hand stock turnover from a parts store to a retail outlet or an in-house inventory room for a service business, keeping inventory on hand is always a problem.
Inventory Management Issues
There are several options to manage inventory that is typically used with different degrees of effectiveness. POS (Point of Sale) terminals have made this type of inventory management easier as they record each item scanned to keep a running and current inventory. This is helpful for placing orders, but it still leaves the potential for gaps in inventory and demand.
The other option is to complete manual inventory counts. These are time-consuming, take staff away from working with customers and also result in significant errors that may impact future orders in a way that hurts the business.
The Solution
One of the most effective options for many companies is a vendor managed inventory system. In this system, the company will meet with the vendor and develop target inventory ranges for items. This will include a maximum and a minimum number of parts, components or items based on the specific product code or tracking identifier.
The vendor will then stock the inventory to the agreed upon level. In some cases, such as retail sales, the vendor may also have an active role in displays, training and providing education to the staff about the items they are providing.
With the vendor managed inventory system, the vendor is responsible for maintaining the pre-established levels. This benefits the company by preventing surplus inventory while also helps to reduce the risk of inventory shortages.
A well-organized and developed vendor managed inventory system is highly effective for a retailer as well as benefiting the vendor. It tends to create more of a partnership, often helping retailers with boosting sales while also allowing vendors to get a better understanding of what types of products are moving in different locations.
