Consumer Products Companies Embrace VMI for Customer-Specific Collaboration

Vendor sees survey pointing to prevalence of vendor-managed inventory over more complex collaboration initiatives

Vendor sees survey pointing to prevalence of vendor-managed inventory over more complex collaboration initiatives

West Chester, PA — December 18, 2003 — Vendor-managed inventory (VMI) programs, which enable consumer products manufacturers and suppliers to manage inventory replenishment for their retailer and distributor partners, are prevailing over more complicated collaboration initiatives for their ability to drive down supply chain costs and establish the critical foundation for partner collaboration, according to the results of a new survey conducted by Prescient, a provider of supply chain planning solutions for consumer products companies.

The solution provider asserted that the survey supports recent analyst conclusions that VMI is experiencing a resurgence of interest from consumer products manufacturers. Prescient's survey queried its customer base of consumer products manufacturers and distributors as well as additional consumer products companies.

According to the survey results, 75 percent of respondents are actively engaging in VMI with an average of six retail partners. In all, respondents named more than 40 retailers with whom they conduct business.

Prescient points to industry trends suggesting that VMI's practical approach to collaboration and retailers' and distributors' increasing insistence that collaboration programs meet their specific technology standards and other compliance parameters are driving this momentum.

The solution provider said it is teaming with retailers and distributors like McLane Co. to help them provide tailored frameworks for VMI to their supplier bases. One of the largest grocery and foodservice distributors and a wholly owned subsidiary of Berkshire Hathaway, McLane has been a long-time proponent of VMI, recognizing early on that there are tangible benefits from this type of supplier collaboration. Already pre-configured to support the electronic data interchange (EDI) specifications of McLane and other retailers and distributors, Prescient said it offers a VMI solution ready-made for McLane's suppliers and offers McLane-specific training programs.

"Prescient has been very responsive in building out a solution that is tailored to our specifications," said Beckey James, electronic commerce manager within corporate merchandising at McLane. "The information our suppliers deliver to us through the Prescient solution is immediately accessible by our systems, allowing true collaboration with our partners."

In an August 7 note, AMR Research analysts Vinay Asgekar and Janet Suleski highlighted the benefits and challenges of VMI. When done right, the analysts wrote, companies can see such benefits as 50 percent reduction in lead time, 20 to 70 percent reduction in inventories, in-stock improvements of 1 to 12 percent, and sales increase in certain fashion categories of 100 percent or more.

"Still," Asgekar and Suleski wrote, "fundamental best practices are lacking in many VMI partnerships&.The Takeaway: To realize benefits out of the VMI programs, companies need to focus on collaborative practices and customer relationships."

"Many of our clients supply consumer products to major retailers like Wal-Mart as well as to myriad smaller retail and distribution outlets," said Jane Hoffer, Prescient's president and CEO. "By enabling our customers to find the right flavor of collaboration to meet the individual needs and standards of each trading partner, we allow them to take control of their retail and distributor relationships without sacrificing the needs and requirements of smaller customers. This culminates in greatly improved customer relationships and decision-making across the entire supply chain."