What Is VMI ?

- Dec 05, 2016-

What is VMI ?

VMI is the short name of Vendor Managed Inventory, it is a contract between OEM and supplier in order to get the lower cost within a acceptable agreement for the dock management, and this agreement can be monitored and adjusted all the time in order to make sure the inventory in good level. Now it is a new thing for China Plastic injection molding manufacturing industry, As we know normally for a OEM company, there are always so many part No in their global sourcing catalogs and it spend of lot of time and cost for the sourcing & quality team . Now the VMI can help the company to solve this trouble and become more and more important for the electronic, automotive, home appliance, medical industries and so on.

VMI normally have the lowest and highest stock level. This lowest and highest point normally depend on the requirements, production Lead time and usual shipping time. In our Medical plastic Injection Molding Industry and Automotive Plastic Injection Tooling industry, we normally define the Lowest at 6 weeks requirement and Highest point for 8 weeks requirement. The Production running time is around 2 weeks afterPOand shipping time is around 4 weeks. That is why the 4 to 8 weeks stock level is preferred for us.

 If The stock is zero, it is very high risk for the manufacturing; If the stock level is lower than the lowest point .we may meet the condition of lack of the components and have to stop our production line ; If the stock level is higher than the highest point, it surely have very low risk to stock , but we have to spend much more cost such as for the material management and stock . So we need to find the balance point of our stock level.

VMI base on the Quick Response and Efficient Customer Service, the core concept is

Share the company’s current stock level , the reality usage , and according to the reality usage and forecasting to produce and recharge the production. Because the both sides share the information and have a revolution comparing the traditional forecasting from end user/ it can reduce the old forecasting un-stable issue and help us the reduce the total supply chain cost from trading , logistic and wrong information wastage .

VMI Requirements:

1Share the information

 The OEM need to help supplier to get the system record and planning for manufacturing date, This date will be used for later implementation.

2Supplier Stock Management Experience

The supplier need to mange and own the stock production until the OEM company use out all of component material. Because there is stock in the warehouse , The OEM team don’t worry about the material supply capacity and some other supply chain risk . This VMI will help the OEM company to remove many un-necessary procedures and focus on for the lower price, higher quality, better service to win the marketing competition .

3Accurate Forecasting

 The supplier and OEM company Planning team need to have a accurate forecasting base on the pasted manufacturing and sale conditions. It can help too reduce the wrong or un-certain forecasting to reduce the stock level , the storage production can be as small as we can . Meanwhile , the very quick response will have good performance for service level .

4The stable requirements

Normally the VMI terms will be used for the big company for the mass production items. The requirement for these items are big and stable every day or it don’t have too much change. And the supplier need to prepare the raw material according to the forecasting in advanced. If the production volume is low or have much change in different time , it is hard to use the VMI terms.

5) The Third Party Warehouse

Normally there are hundreds supplier for our production list , it is not realistic to ask each of our supplier to build a plant near our manufacturing plant . So we need to have a VMI HUB, it is a third part warehouse which have the experience for VMI production. No matter for the OEM company or for the supplier , the main capacity of them focus on the manufacturing , but not to the logistic. So There is obviously much better solution to let a professional 3PL warehouse to do this works ,


Asia Billion Industry Co Limited as a professional Plastic Injection Molding Manufacturing Companies in China, we are learning and using the modern logistic solution to help our customer to development their production to win the competition, No matter what do you need for Plastic Injection Molding or tooling Manufacturing resource , Please contact us freely for more details at sales@ab-industry.com .

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