Do you know automatically if you have a correct item in stock when a customer needs it? Are you ready to strengthen the partnership between Manufacturer and Distributor? Well then it’s time you find out about Vendor Managed Inventory (VMI)!
Vendor Managed Inventory (VMI) means the supplier to a mass merchant manages the inventory of the merchant. Product is replaced as it is sold (eliminating merchant purchase orders). Technically, this requires Point of Sale (POS, or cash register data) arriving to populate a business application that has prior history and sales projections.
Progressive merchants desiring to improve their in-stock position are requesting Inventory Availability daily. This alerts merchandising to upcoming shortages offering the potential of second sourcing. For the Top 25 or so vendors, the No Outs policy can be met. Technically the existing EDI system is used, but the file size is large so a direct connection eliminates pricey EDI network (VAN) fees.
The Inventory Report (EDI document 846 or 947) can report daily, weekly, or as requested. The data arrives through your EDI gateway and is loaded into your ERP system or a temporary table used by your developers. The key report is the Projected Sales Report for the upcoming month(s). Inventory availability reports are also available from third party logistics providers.
The cost of receiving POS data, (EDI Transaction Set 852) is high because EDI networks charge by the number of characters (bits). The amount of data in an 852 more times than not is 100 times larger than a Purchase Order (850). The quantity is a multiple of the number of GTIN’s (UPC’s) sold times the number of stores. For example, a Wal-Mart vendor with 25 GTIN’s in 2500 stores receives 62,500 datum weekly (example: 13 units of 0534825-1399223 sold in store 3582 the week of Jan. 15.)
To cut cost, move to direct connection for POS data, to eliminate EDI network charges. This requires purchase of a specific EDI system to process the POS data. Typically, the cost of the EDI system and implementation for 5 merchants is about $35,000. The 50% ROI threshold is met if the monthly cost is $1500 for POS data.