Your VMI program may be compromised if the part numbers on the bin don’t match

Over the past couple of years we have seen a growing trend among customers where VMI item part description does not match the component in the bin on the floor. This is easy to understand when you consider many of our customers have experienced acquisitions and consolidation of both product and manufacturing lines. Typically overloaded procurement and planning teams inherit new BOMs, part numbers, and vendors without the benefit of adequate part descriptions, where-used data, or usage data. While there are many reasons for inadequate information, our experience shows there are three main reasons:

1. Disparate operating systems limiting access to data. The data may be in the system or in reports but no one knows where it is or how to get it.

2. Poorly maintained item masters with on the fly engineering changes. How many times have you heard from the production manager or engineer, “Don’t worry, it’s just a simple fitting we’ll write the ECN tomorrow. Just get the part”!

3. In some cases, there are no part numbers or item masters for expensed items. The only information available is from Accounts Payable systems. In most cases, part descriptions on invoices are truncated. We have had to do countless invoice crawls though mountains of paper invoices to piece together part description and usage information. Now if you add this data problem to the need to respond quickly to copy exact, less than lead time orders from new customers; it is very understandable how a procurement team can be held captive by its suppliers. Procurement has to rely heavily on its vendors to know what is being supplied and how much is actually needed to support production.

How then does a procurement team in this situation ensure long run cost effectiveness of their VMI programs? What are the warning signs that the supplier has the upper hand?Here some important questions to make a quick diagnosis:

1. Are the part numbers on the bins the supplier’s part numbers?

a. If the answer is yes, then ask for a report cross-referencing their part numbers to yours
b. Ideally , Barcode labels should reference your part numbersc. If you do not have your own part numbers for the items in the bins the climb just got a lot steeper.

2. Assuming you have a part numbering system for expense items, who controls the system of record for part description?

a. It is very likely you both have systems of record for part description
b. It is time to compare description data
c. If you do not have manufacturer name and part number in your system, get it! Manufacturer name and part number are 2 of the 3 essential ingredients to long term cost control.

3. Who controls the system of record for transactional data (how much is being used and where is it being used)?

a. Most of the time we find it is not you!
b. Make sure you ask for detailed usage reports including ROP /ROQ and number of shipments per location.
c. You will soon find out how they are doing on managing your inventory!

If you get resistance to these very reasonable requests for information it is time to be concerned. After all somewhere in the not too distant past your organization must have provided the supplier with the information and/or guidance to what was required. You own your part description data; the supplier is only using it to provide you the quantity and location of where it is required.

--------------------------------------------------------------------------------
The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.