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How Kanban is Re-Inventing VMI

A few decades ago, the idea of Vendor Managed Inventory was very popular. It was a new, innovative way of managing inventory where the supplier held the product until it was used. The customer benefited because they could maintain a constant inventory and were in a better position to negotiate. The supplier benefited too, since they were guaranteed business with the customer. It soon became apparent that VMI came with massive risks to both parties. From the customer’s perspective, the risk was with the supplier as they had to keep up with the order quantity and timing of their orders. From the supplier’s perspective, the customer had no reason to match inventory levels to demand, meaning thresholds were set much higher than needed. This mutual risk factor meant that VMI was used very rarely over the years.

EMERGENCE OF E-KANBAN

You may have heard about the Two-Bin Kanban method of inventory management. It’s practicality has only increased with electronic Kanban. Signals are scanned using barcode scanner and are automatically updated, without any human effort. When bins are empty, the order is sent to the supplier immediately.

IMPROVING VMI

E-Kanban systems solve the risks involved for both parties of the VMI system. For the supplier, it helps ensure that the customer is maintaining an appropriate inventory level, since the Kanban bins are only refilled when needed as per the demand. This improves the trust from the supplier side, For the customer, it ensures that the supplier can keep up with the demand since it’s a consistent and regular bin size that is reordered. This improves faith in the supplier’s ability to fulfill orders. This mutual trust helps reinvigorate the VMI system into a new era of inventory and supply.

TPSynergy’s ekanban solution helps companies of all sizes manage their inventory, and establish a balanced VMI system. Learn more here: https://www.tpsynergy.com/e-kanban

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