As companies strive to work smarter and more efficiently, an increasing number of them are looking to their suppliers to provide vendor-managed inventory (VMI) and auto-replenishment programs that give purchasing organizations peace of mind while also freeing the latter up to focus on more important tasks.
Suppliers that offer VMI programs, for example, gain access to their customers' inventory data and are responsible for keeping that inventory at desired levels. The process can be used for parts, supplies, maintenance and repair, and various other items and responsibilities. Auto-replenishment works in a similar fashion but focuses primarily on automatic purchase order creation and auto-delivery of products directly to a plant, warehouse or retail store.
Two-way streets
In terms of the benefits they provide, auto-replenishment programs and VMI are both two-way streets, according to W. Bart Trebnick, Digi-Key Corporation's director of Supply Chain Solutions. Suppliers gain access to a steady stream of orders and/or work while procurement agents get the benefit of reduced total cost of ownership, improved service levels, lower stock-outs, reduced warehouse or plant floor space, and less incidences of obsolete inventory. For buyers, there are also fewer purchase orders to cut and fewer calls from plant operators wondering why their critical parts are out of stock.
Trebnick says auto-replenishment and VMI programs work particularly well when the suppliers themselves carry ample inventory. "When you know that your vendor has the inventory on hand," explains Trebnick, "then options like auto-replenishment become strategic advantages for the electronics buyer, who knows that he or she can rely on the repetitive buying program to work as planned."
"In terms of the benefits they provide, auto-replenishment programs and VMI are both two-way streets, according to W. Bart Trebnick, Digi-Key Corporation's director of Supply Chain Solutions.To kick off these types of programs, Trebnick says buyers should focus on the 80 percent of annual spend that is allocated to the company's top 5-10 percent of parts. "That's where companies will see the biggest cost reductions from VMI and/or auto-replenishment programs," says Trebnick, who finds most electronics buyers open to the proposition of confidently offloading that aspect of their purchasing operations to a reliable supplier.
Ensuring the best possible relationship means finding a supplier that can operate well in the extremely dynamic electronics contract manufacturing environment – where companies, parts, assemblies, part numbers and processes change constantly. "Make sure the supplier you're working with knows how to stay on top of these changes," says Trebnick, "and can supply the right mix of parts, service and support on an ongoing, reliable basis. Without these elements in place, the relationship won't produce the desired results."
