Does Your V M the I?

You’re Thinking Lean: 1) Produce Only What You Sell; 2) Consume Only What You Need; and 3) Inventory is Evil

The question is, “Is your VMI supplier capable of meeting your requirements”? Is the Vendor really “managing” your inventory or are they just selling you inventory at their convenience?

We’ve come to expect certain benefits from VMI programs such as Vendor Consolidation, Volume Pricing, Local Stock, Onsite Resources, and reductions in: Inventory, Stock outs, Downtime, and Paperwork.

How many times have you launched a VMI program and found it did not produce the measureable results as promised? If you take the time to closely analyze the problem you will find the supplier was actually incapable of managing the inventory. The V is not M-ing
the I!

What are the symptoms of poor management, you might ask? What is the frequency of the breadman on site? How much churn of personnel executing the breadman role? How many bins that are obviously over stuffed or nearly empty? How many substitute components? How many missed delivery promises?

Or even worse, are all the bins overstuffed? Do you really need all the material? I like to call this type of inventory strategy: “some is good - more is better!” This style of inventory practice for expense and C items may have worked in the 70’s, but not today!

Successful VMI programs are very doable projects, but only with highly capable suppliers. It takes suppliers with many cycles under their belts designing, building, and managing Point of Use VMI programs that actually produce results. The devil is, as always, in the details: complete and accurate part description, accurate usage measures, knowing where and when the part is needed, etc.

In project management circles there is a well-known model for predicting project success called KEP. KEP is an acronym for Knowledge, Experience and Performance. It’s important to use KEP to scrutinize how the Vendor intends to manage your inventory. If your suppliers are not providing you with observable evidence of 1) how they define your parts in their systems (i.e. do they have an item master for each part on the program with unique re-order points and re-order quantities), 2) how they establish and more importantly refresh /adjust re-order point and re-order quantities, or 3) how they identify and communicate off balance sheet obligations; then you are talking to a supplier that simply will not produce measureable results. More on this in my next blog.

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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 www.iPowerNE.com.