The added value of customer managed inventory

With customer managed inventory (CMI), you place your inventory in your customers’ warehouses and let them handle the inventory management. They scan or otherwise automatically monitor inventory items, and then that data is transmitted directly to your system and triggers automatic replenishment as needed. From here there will then be ways and processes from which you then take full delivery of your stock into your place of work / premises. Typically a third party logistics provider and company will deliver this key service to you.

How this offering has worked in the face of COVID-19 for the end user

While the right ecommerce website is necessary for distributors, a Customer Managed Inventory program supported by the right technology is a better way to replenish inventory, especially given today’s social distancing requirements. This has also been able to work in the way the stock is also able to arrive to site and in the hands of the end user. It is a pretty safe way of stock passing about.

Why people should not rule out customer managed inventory 

Inventory replenishment for critical or frequently used items is better managed away from your website. Why? Ecommerce takes the customer longer, because they have to enter in their item numbers multiple times by hand. They likely have to walk out to the warehouse. From here they wull go through the bins, look at each item, write down the part numbers and quantity. They will then sign in and start keying in those numbers. Secondly, ecommerce encourages price shopping. As long as they are entering those item numbers into your website, they might as well be entering them into other websites to see who has the best price. Without a relationship that goes beyond the transaction, what’s stopping them?

Getting closer to the products and the sales process too

Get closer, and remove friction from the sale. Give the customer an app on a mobile device such as an Android, iPhone or tablet. When they decide they need more of an item, they simply scan a barcode. The package quantity automatically comes up on the device. They tap, submit and go back to work. After an order is placed, the distributor makes the delivery, touch-free. Apps can even record the item location at the time of scanning, which helps the put-away process. This kind of Customer Managed Inventory (CMI) technology is far faster, eliminates price shopping, and reduces the risk of error.

Inventory replenishment and how this has had to adapt in the face of COVID-19 

A common service is Vendor Managed Inventory (VMI). This is where a rep regularly visits a customer to see how much inventory needs to be stored. This is to make sure bins are full enough not to run out until the next time. Now, in the age of COVID-19, does the customer really want the rep coming out? Does a rep really want to go out? In many cases, we’ve heard the answer is no. Reps still aren’t visiting customers in person.

All of this points to where and how technology is here to stay and will only become more vital to the running and working of a business in this arena. With the right technology in place, key sites are able to operate in a much safer overall manner.

How the world may end up working post COVID-19

Beyond COVID-19, CMI remains a long-term play for distributors. Chances are, reps aren’t going to be as welcome as they once were. The technology makes it much easier to serve customer needs more efficiently. There no disruption to the customer’s day necessary. As a result, reps can spend less time counting widgets and more time on solving customers’ real problems. The distributor reaps the benefit of the value-add, and customers tend to be more loyal because you’ve made it easy for them. Even easier than an ecommerce transaction. It seems to be the case that added value solutions will only be more key as time goes on.

Similar to VMI

CO-managed inventory (CMI) is similar to vendor managed inventory (VMI). But in case of CMI the supplier takes responsibility to manage the replenishment process of the inventory and develops forecasts in the customer’s system accordingly. In case of CMI, the customer provides access to the system to the supplier. The supplier is the one who reviews all information and generates order in the customer’s system.

In detail though at this point, the main difference between CMI and VMI is that in case of CMI the order placed by the supplier is just a recommendation and is not a confirmed order unless the customer approves it. In case of VMI, the order generated by the supplier on the customer’s behalf is a confirmed order and the supplier is responsible to deliver the product and bill the customer for the materials delivered.

CMI in line with VMI

Perhaps the reason that consignment is often confused with VMI is because the concepts work so well together. Because customers have little control over their stock levels in a VMI system they need some kind of assurance that they are only going to be paying for what they need. The method we mentioned earlier about buying back stock from customers is a reasonably fine way of dealing with things. But it’s got nothing on consignment based methods and suppliers buying back stock from a customer is a hugely wasteful way of doing things in comparison.

With the buyback system, the customer needs to keep an eye on stock themselves to decide what they want the supplier to buy back from them. The customer and the supplier have to create invoices for both the initial sale and the buyback, and then money transfers need to be made. With a consignment based system, you avoid all that wasted time and energy. The customer only ever buys what they need, and the supplier only sells what the customer wants.

Overall 

If a supply chain manager becomes too reliant on a supplier to manage its inventory, the supply chain manager may live with higher prices, reduced quality or other supplier-related issues. This is therefore where and also how a CMI model can work best as the customer really can get and be given everything they want from a stock control point of view. Also there are likely to be other ways they can really adapt the service. This is terms of how it can work into the wider running of their business also.