Simplify inventory management with vendor managed inventory (vmi)

How vendor managed inventory works
Keeping up with customer demand is a big issue for ecommerce stores because there are so many competitor options available to shoppers. If you’re out of stock even once, customers lose trust in your organization and look for a similar product elsewhere — and you might lose that customer for good. VMI minimizes the chances of that happening by aligning vendor and buyer priorities and instituting checks and balances throughout the process.
The VMI process starts with the vendor and the buyer determining what goals they want to achieve and when. There are some common KPIs for these objectives.

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  In-stock performance. This metric reflects how well in-stock inventory is selling.
  
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  Inventory turnover rate. To calculate inventory turnover, divide the cost of that inventory by the average inventory for the same period. A high ratio indicates that inventory is selling well and a low ratio indicates weaker sales.
  
  
  
  
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  Transaction cost. Transaction costs should stay relatively stable. If there is high variation from one month to another, there could be a disruption in the supply chain.
  

The two parties also decide whether the buyer will pay for the inventory upon acquisition or after a customer has purchased a product and how inventory returns will be processed.
Once those decisions are made, VMI generally follows a standard operating procedure.

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   The vendor ships inventory to the buyer. Often, vendors supply an advance ship notice (ASN) on behalf of a buyer. An ASN is similar to a purchase order — a legal document that approves a specific purchase — but it differs in that it’s sent after the vendor makes its shipment. Advanced ship notices help finance teams on both the buyer and seller sides keep track of transactions and inventory. These documents flow automatically into each company’s financial systems, reducing accounting inaccuracies.
   
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