Studies show that companies that focus on supply chain optimization have supply chain costs 15% lower than the organizations that do not. Order fulfillment is just one small piece of supply chain management. QuickBox realized this and developed a complex yet precise service called Vendor Managed Inventory (VMI), in addition to their fulfillment program. VMI has become a new tool for e-commerce brands to optimize their supply chain while saving time, money, and hassle.
What is Vendor Managed Inventory?
VMI offers a complete package of service for developing, producing, and managing the inventory of a custom product. Established health and beauty e-commerce brands can utilize this service for high performing products that they wish to enhance, cut down on costs, or simple remove the hassle of supply chain and inventory management.
QuickBox Vendor Managed Inventory Solution
QuickBox offers a superior Vendor Managed Inventory Service that looks to cure supply chain’s pains mainly to do with inventory management. The service consists of three phases.
Phase 1. Supply Chain Expertise
This consists of a team of supply chain experts with over 150 years of combined supply chain management experience. Together, they ensure that the e-commerce business owner, also known as the buyer in this scenario, enjoys superior quality and product formulation with enhanced productivity and delivery.
In addition, the expert team build detailed product specification sheets for the buyer to ensure that the product specifications for their inventory are met. The team also provides accurate inventory demand forecasts so that the buyer has just the right quantity of stock at any given time. These forecasts also allow the buyer to only have to purchase a weeks’ worth of inventory at a time, instead of 6 months. Think about how that would improve your cash flow.
Phase 2. Research and development
Research and development is an optional add-on feature of the QuickBox VMI solution. The research and development team is available for creating custom formulated products that maintain flavor, quality, and overall product improvement.
Apart from enhancing the development of the product, the team is also responsible for designing new products to help fill existing and upcoming opportunity gaps for the buyer’s brand.
Phase 3. Integration management
Integration management ensures that the products get to the buyer as required. This service provides transparency in the entire process by allowing the buyer access to the production lines and all corresponding documentation, including third-party testing. This way, the buyer knows that the products they get from the manufacturer are compliant with the industry’s best practices and maintain excellent quality. The solution also ensures that the buyer gets the products in the specifications provided, in the right quantity, and when they need them.
Benefits of QuickBox VMI for supply chain management optimization
Supply chain experts predict that by 2022, the supply chain management software industry will reach $8.5 billion. This is because both big corporations and small businesses have realized that optimizing their supply chain can lead to enhanced customer service, cost savings, and smooth supply chain operations.
VMI benefits for eCommerce Business Owners
1. Fully managed supply chain
A smooth flow of inventory features a fully managed supply chain. Limited visibility can lead to the manufacturing of products that do not meet the buyer’s compliance and quality requirements. On the other hand, manual tracking is inconsistent and can be time-consuming and welcome errors and redundancy. VMI allows for a fully managed supply chain that addresses issues that come with insufficient order management and ensure customer satisfaction.
2. Guaranteed regulatory compliance
VMI integration allows transparency in the entire supply chain process. Therefore, the buyer can track all the steps in their supply chain ranging from the manufacturing of the products to the fulfillment of their orders with transparent documentation and third-party testing.
With that, the buyer can confirm that the manufacturer meets the given products’ regulatory compliance requirements.
This helps the buyer meet the products’ industry standards, avoid rubbing shoulders with the law, and achieve customer satisfaction through quality.
3. Accurate inventory management
Inconsistent tracking linked to manual inventory management can lead to time wastage and losses. VMI allows for accurate inventory control whereby the buyer has precise information on how much stock is available and how much they need to reorder in order to meet the customer demand. VMI provides the roadmap to better inventory planning for the buyer and a smoother supply chain process.
4. Reduced overstock
Statistics show that 43% of small and midsize businesses do not track inventory. Overstock is among the consequences of not monitoring inventory. Overstocking happens when the buyer purchases more stock they are selling or can sell within a given time, and it causes severe issues.
It brings about financial issues as money is spent on purchasing the inventory, but the business does not get any of it back because the investment is idle and doesn’t generate cash flow.
It also attracts carrying costs. Logistics, warehouse storage costs, and labor costs for the workforce that will be handling the inventory add up quickly. These extra expenses can also lead to product shortages due to money lost spent on carrying costs instead of investing in more inventory.
Seasonal products that have low shelf life can also be rendered obsolete once they reach the expiration date, which translates into losses.
Overstocking can also lead to a decline in customer satisfaction as the business may be unable to provide the customers the products they need when they want them, while the shelves are filled with the ones they don’t need.
QuickBox VMI solution allows accurate inventory tracking, preventing overstocking.
5. Prevention of stock-outs
Just like overstocks, stock-outs have their negative impacts on the businesses too. Customers expect their demands to be met and their orders to be delivered on time. When understocking occurs, potential disaster is instore.
Businesses are likely to encounter lost sales and become unable to fulfill existing customers’ orders.
The worst of the consequences is the damage to the reputation of the company. The business will be considered unreliable, and will likely miss out on tremendous opportunities because of that.
6. Fulfill product opportunity gaps
Customer demand changes from time to time potentially creating seasonal gaps in your order fulfillment. With QuickBox VMI solution, through the research and development service, the gaps can be identified and filled.
This will allow for adjustments in the supply chain through the different seasons, meeting the customers’ demand and, at the same time, allowing the free flow of operations.
7. New product development
Through accurate inventory tracking, buyers can get market insights and establish when the demand is shifting. This can help them identify the products that customers prefer in the changing seasons, which provides a basis for new product development.
8. Improved cashflow
Improved cash flow is among the best benefits of integrating VMI solution into your supply chain. Here are the main ways VMI helps e-commerce businesses do this:
- The most important- inventory is only billed upon transfer. Transfers happen weekly, based on forecasting provided by the expert team. Therefore, the buyer only needs to purchase enough products to meet the coming weeks’ sales. This frees up tremendous amounts of cash.
- By meeting compliance regulations and quality, customers will consider your business reliable, and this alone will increase your market share. The bigger the market share, the better the cash flow.
- Cutting down on operating costs is yet another way for businesses to improve cash flow.
- Overstocking is one of the consequences of poor inventory management. Overstocking attracts carrying costs, losses due to obsolesce, and shortage.
- Understocking also attracts costs attached to emergency orders and also makes it impossible for the business to meet customer demand. This, too, affects the cashflow. VMI ensures accurate and proper inventory management, which is necessary for healthy cash flow.
Why QuickBox VMI solution for optimizing your supply chain?
You will no longer have to worry about overstocks, understocks, losses, or shortages. There will be a lot of costs and time savings that will allow you to focus on growth areas in your business like improving your infrastructure, getting more human capital, expanding your business, and marketing your products. Vendor managed inventory solution is the answer to a smoother supply chain, and stress and hassle-free inventory management.
For proof of concept, contact QuickBox for a VMI Supply Chain Audit to see how the solution might work for you and the issues it could address in your supply chain.