Managing Vendor Inventory

By Carol Tice

Managing inventory is an operational aspect of almost every business. Efficient vendor managed inventory can increase margins and reduce costs.

In order for small businesses to realize the supply chain benefits of vendor managed inventory, a working partnership must be forged between supplier and customer.

Build a Vendor-Customer Relationship
The key for small businesses to implement a successful vendor managed inventory system is to approach the relationship with suppliers as a partnership.

In many cases, vendors tend to operate on an island. They receive orders, ship out goods and services, and move on to the next order. When this happens, vendors don't know whether the final goods or services that they contributed to in the supply chain sold quickly or not at all.

Vendor Managed Inventory Partnership Tips
Consider the following advice when trying to build a relationship with vendors:

• Protect your information: Building a relationship involves trust. Forming a partnership may involve sharing sensitive information about your company.  This information likely includes confidential information about your small business, such as sales and revenues. It is recommended to put in place a strong confidentiality agreement that a partner must abide by; therefore, if the relationship does not last, competitors will not be able to get information from vendors. 
• Don't ignore medium size vendors: Vet all options when choosing vendors. Big supply conglomerates might not provide the best service or price to a small business.  Consider medium and smaller size vendors as they may be the best fit for a vendor relationship. Your business will be more important to these size vendors than the big box outfits, and as a result, they will make for better business partners.
• Understand your partners: Once you select a vendor, make it a point to get to know their business. These vendors are going to be partners and they will make critical decisions that may impact your business. They help keep your shelves stocked and provide the services that are needed to run your business. Learn about their business, get to know them, and cultivate the relationship so that you trust them to keep your information private. Research prospective partners by getting to know them, calling references, and reviewing bank statements.
• Map out a strategic plan: Ensure that all possible eventualities are planned for and. Get down to the narrowest details and draw up an air tight contract that accounts for every detail that will impact the relationship.

The benefits that accrue to a small business from building lasting relationships with vendors are immense. 


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