How Modern Inventory Management Builds Effective Supply Chains

How Modern Inventory Management Builds Effective Supply Chains

How Modern Inventory Management with CMI and VMI Build Effective Supply Chains

Written By: LAPP Tannehill

As supply chain challenges are still disruptive across the globe, LAPP Tannehill explores how modern inventory management using CMI and VMI can help businesses ease inventory stress and stay ahead of strenuous lead times.


With supply chain challenges running rampant across the electrical connectivity market (including wire, cable, connectors and wire management products) for the last several years, manufacturers are rapidly improving their inventory management practices to stay ahead of the curve.

Inventory can be a critical asset on the balance sheet and inventory management (i.e., the tracking of inventory from suppliers/distributors to a manufacturer’s warehouse and eventually to the end-product) has always been an important link in the supply chain.

CMI & VMI Solutions

A lack of inventory at the right place and time creates unhappy customers and lost revenue whereas too much inventory increases storage costs, negatively impacts cash-flow, and lowers profits.

The goal of inventory management is to have the right products in the right amount, at the right place, and at the right time.

Good inventory management, in turn, requires good inventory visibility — knowing when to order, how much to order, and where to store stock.

To improve inventory visibility manufacturers and their suppliers/distributors need to collaborate closely together, aligning goals and optimizing operations that will ultimately result in a lean and effective demand-driven supply chain.

CMI (Customer Managed Inventory) and VMI (Vendor Managed Inventory) are two approaches that leverage technology and business collaboration to improve inventory visibility, enabling effective inventory management, and ultimately supporting an effective supply chain to help manufacturers serve their customers and produce growth for their stakeholders.

Per Zac Chamberlain, Purchasing Manager at G.L. Huyett from “The Potential and Pitfalls of Vendor Managed Inventory” (SupplyChainBeyond.com),

“The single biggest cost associated with original equipment manufacturing (OEM) comes from line shutdowns due to shortages of critical parts. VMI can help prevent line shutdowns by avoiding stock-outs and preventing cash flow restrictions caused by inventory being tied up in a non-nettable location.”

What is Customer Managed Inventory (CMI) and Vendor Managed Inventory (VMI)?

CMI and VMI are both inventory models supported by technology that are designed to streamline inventory management and order fulfillment, helping to assure that the proper parts always remain stocked.

They both improves collaboration between suppliers and distribution partners by aligning business objectives and optimizing operations for all stakeholders.

CMI enables customers (manufacturers) to take control of their own inventory replenishment while VMI allows vendors/suppliers to recommend orders for their customers.

How does CMI and VMI work?
CMI and VMI processes have many similarities including:

  • A replenishment signal is initiated within the CMI/VMI platform.
  • CMI/VMI platform reviews the data and sends a recommended inventory replenishment order based on key factors and agreed objectives.
  • The distributor/supplier reviews and approves the recommendations.
  • A purchase order (PO) to the supplier and a PO acknowledgement to the distribution partners in an electronic data interchange (EDI) format.
  • Once the partners approve the PO, the order can be shipped.

The main difference between CMI and VMI is in how the initial replenishment signal is conveyed from a manufacturer to their supplier/distributor.

CMI

Customer Managed Inventory enables manufacturing companies to easily handle inventory management during the flow of real-time day-to-day operations.

Team members can scan (via a barcode or RFID scanner) or use other methods of automatically monitoring inventory levels and transmitting replenishment data directly to a supplier’s systems.

CMI can be a very convenient way manufacturers can self-manage their own parts inventory and ensuring they receive the right products at the right time with minimum effort.

Some CMI programs have supplier inventory placed directly in a manufacturer’s warehouse enabling even faster replenishment cycle times.

VMI

Vendor Managed Inventory programs can take several forms that are either “hands-off” or “hands-on”.

Hands-off systems including a Kanban system or Two Bin (a variation on Kanban) system can use weight-sensing, RFID or color-coding methods to signal replenishment.

A simple hands-on process can be as straightforward as a vendor representative periodically visiting the manufacturing site and scanning for inventory that is running low on a scheduled basis.

Regardless of methodology VMI considers pre-defined settings such as min/max shelf amounts, service level and inventory turn goals.

Just like CMI programs, some VMI programs may have supplier inventory placed directly in a manufacturer’s warehouse for faster cycle times.

What are the Benefits of CMI and VMI?

CMI and VMI enable many benefits to all stakeholders. 

Benefits for customers include:

  • Improved service-level and on-time delivery to their end customers due to better inventory fill-rates
  • Reduce stockouts while simultaneously reducing inventory levels, shortening inventory turns and lower the cost of carrying inventory
  • Less effort, time and cost for the planning and ordering of inventory
  • Protection against the supply chain bullwhip effect


At the same time suppliers and distributors can also benefit from a CMI/VMI program:

  • Shortened lead-times improve the customer experience and improves service level by having the right products on hand
  • Enable lower inventory investments (such as safety stock) and reducing stockouts due to increased and faster demand visibility
  • Increase inventory turns and cut carrying costs of inventory
  • Strengthened relationships with customers

Overall, both CMI and VMI programs are highly effective ways for manufacturers to effectively manage their inventory.

Regular or even real-time monitoring of inventory levels results in faster stock replenishment while reducing errors, paperwork, and time/effort.

LAPP Tannehill Solutions for Inventory Management

LAPP Tannehill offers CMI and VMI solutions for inventory management. Enrolling in our Quick Pick Program allows our customers to use a scanner to easily capture items in their warehouse that need to be replenished.

When scanning or manually entering in the inventory you'd like to replenish, you can review the order before sending, and once it's submitted our team works to ship your order to you as quickly as possible.

Quick Pick Scanner | Scan, Send, Receive

Quick Pick Program Benefits

  • Reduce inventory costs
  • Reduce replenishment costs
  • JIT – Just in Time Delivery
  • Streamline and error-proof processes
  • Improve order accuracy
  • Quickly process and confirm orders
  • Reduce administrative costs


Whether you'd prefer CMI or VMI, the Quick Pick Program allows you to reduce your inventory and replenishment costs, streamline and error-proof your processes, and quickly process and confirm orders.

Design Your Specific Plan
We have the ability to tailor the Quick Pick Program to your unique business requirements.

Storage Preparation and Inventory
We will assist you in determining stock levels and re-order points.

Data Transfer from the Floor
We will provide the necessary equipment and training to ensure complete data transfer.


To explore how LAPP Tannehill can work with you to enhance your wire and cable inventory management with CMI/VMI and other programs, reach out to us regarding your specific inventory management goals:  Inventory Management | Vendor Managed Inventory Program



Need a Quote?

Our quick quote form is an easy way to get you the information you need to keep your project on track.

If you still have questions, chat with us online or call us at 800.633.6339. Our customer service representatives are available to answer questions Monday through Friday, 8am - 5pm CST.

Start Your Quote

Customer Portal | Online Account Management Tool for Current Customers     Log In

Copyright © 2013-2017 Magento, Inc. All rights reserved.