Suppliers and wholesalers are sharing more data than ever. Here’s why it’s the new normal.
“Everyone talks ‘win-win,’ but what really seems to resonate with industrial suppliers is the idea of getting better. Which is great news for me because that’s what supply chain management does.” That’s how Tom Hoar of TrueCommerce Datalliance explained why supply chain management programs – and vendor managed inventory (VMI), in particular – have seen an uptick in participation by plumbing manufacturers.
By Hoar’s count, there are about 25 plumbing supply manufacturers that run vendor managed inventory (VMI) programs. And he says there’s plenty of opportunity for others to join the trend.
“I’ve seen VMI work in a lot of different industries – electrical, power transmission, heavy duty truck parts, consumer goods – and plumbing is no different. And, although most of the big names in plumbing have seen the light, there are a couple I am still working on,” stated Hoar.
For the uninitiated, VMI is the process of suppliers and their distributors or wholesalers sharing key metrics, such as sales, desired in-stock levels, promotions, lead time, and the like. Suppliers then monitor the data and electronically generate recommended purchase orders for each partner. Supplier order recommendations significantly streamline the reordering process for wholesalers, distributors, and retailers, especially when considering each might stock thousands of SKUs and hundreds of brands. This frees buyers to focus less on replenishment and more on strategic initiatives.
I asked Hoar why it is so important for a buyer to spend less time reordering product. “Imagine trying to track and replenish all of the items in your pantry,” explained Hoar. “Do you have time to make sure you have every ingredient? No. You would drive yourself crazy. But if someone was tracking and ordering items in your pantry on your behalf, you would have more time to prepare food and spend less time shopping.”
Following this analogy, it is possible to see why buyers would find value in VMI, especially considering that plumbing distribution centers routinely stock 15,000 active SKUs, with branches carrying between four and five thousand apiece. However, what benefit does the supplier receive from managing its customers’ inventories?
“Yes, VMI makes it easier for buyers, which is great,” said Hoar. “But, let’s back up. What happens if a buyer gets behind? They may not even review inventory positions of certain products for days. If your SKU is out of stock, guess what? It’s going to stay that way until they place an order. With VMI, order recommendations are automatically generated to ensure wholesalers have the required stock. Plus, these recommendations are coming from the supplier, so things like product introductions and lead times are already factored in. It’s a much smoother process for everyone.”
Chad Molen, Director of Service Center/eBusiness for Viega said, “Without VMI, we may never know that the wholesaler is out of product. Viega prides itself on being an industry leader when it comes to availability.”
Molen has been a proponent of VMI for almost a decade and, like Hoar, has seen the market shift. “When I first started VMI in 2009, there was very little interest,” said Molen. “I now have a waiting list of customers who want to get going with us. Those wholesalers who recognize the value of VMI today will be a step ahead of others in the industry. They are also valued more by the manufacturer as a true partner in the market.”
Simon Ellis, Program Vice President – Supply Chain at IDC Manufacturing Insights, agrees. “Although VMI is a long-established approach to managing stock levels at retail or wholesale, it remains a highly effective way to ensure that inventory is available for sale and the fulfillment process are optimized,” notes Ellis.
The popularity of supply chain management programs excites Hoar. “When Henry Ford popularized the assembly line, manufacturers didn’t throw their hands up and say, ‘Whelp, we can’t compete with that!’ It spurred manufacturers to implement their own versions and they later adopted other innovations, such as automation and lean principles. I think that’s where we are with VMI and, ultimately, it will become abnormal to not have it.”
Wes Clark is a marketer and author who often finds himself in working in restricted areas. From hospital operating rooms to propane loading terminals, Wes believes immersion is the key to bringing a story to life. When not in the field, Wes can be found creating content and developing marketing strategies for TrueCommerce Datalliance.
For more information on vendor managed inventory and other supply chain management initiatives, visit www.datalliance.com.