Inventory waste is defined as having too many of the wrong parts or items in stock, not enough of what is needed, and too much in unfinished goods or work-in-progress (WIP) inventory.
How VMI Services Reduce Inventory Waste
One of the most significant benefits of vendor managed inventory (VMI) services is to provide the OEM’s production floor with the right parts in the right place at the right time and in the right quantity needed.
It sounds simple enough, but when dealing with low-cost, high-volume C class parts, an OEM has to consider that these parts typically account for the highest number of SKU’s and can be extremely difficult and costly to manage internally.
How does VMI work?
- An effective VMI program incorporates a “pull” system: parts are only replenished after use and typically run on a 2-bin Kanban system to allow time for replenishment to arrive before the second bin is depleted.
- The VMI provider and the customer/user work together to make sure there is a consistent flow of inventory.
- Ongoing communications minimize over-stocking, shortages and product obsolescence.