Vendor-Managed Inventory Platforms Seen as Time-Consuming

Business' goals of reducing costs and improving customer service with VMI are beset by a persistent crop of challenges.

vmi and gatepoint

Less than a quarter (22 percent) of businesses use automated B2B technology to share inventory information, primarily because they view doing so as time-consuming, according to according to a survey of 300 executives by Gatepoint Research and sponsored by E2open.

One-third of all respondents rated their visibility levels between average and non-existent. Only 26 percent of executives rated visibility into current inventory levels as great. The results indicate the adoption and execution of vendor managed inventory (VMI) programs is of interest to organizations, but the drive to reduce costs and improve customer service by levels by doing so is beset by a persistent crop of challenges.

Only 30 percent of those surveyed report using VMI on both buy-side and sell-side, whereas those implementing solely buy-side VMI programs outnumber those implementing solely sell-side programs by more than two to one.

"What surprised me is that it’s 2015, and there is still a heavy reliance on manual communication for sharing inventory information. And, while 42 percent say they are sharing inventory via their ERP system, satisfaction on overall visibility remains low," Sean Rollings, vice president of product marketing at E2open, told eWEEK. "The satisfaction part isn’t surprising. With manual communication, you rely on individuals to share information in a one-to-one fashion. That means you depend on a person to share it – on their timetable."

Rollings also noted manual processes are rife with errors, so the timing isn’t reliable, and it’s prone to errors, something he says is not exactly confidence-inspiring.

Visibility into time-sensitive supply chain data continues to be a struggle, with more than half of those surveyed reporting that their business cannot share daily forecast information.

The survey revealed that overall, VMI is not employed at all by nearly 30 percent of survey respondents, though the opportunity for implementing a VMI program appears clear, as more than a third (36 percent) of those surveyed stated that their organization has too much cash tied up in inventory.

In addition, 29 percent said that they have too much excess or obsolete inventory, and only one-third said that inventory levels reflected optimized cost and service levels.

Finally, among those surveyed, nearly one-third reported collaborating "poorly" or "not very well" with trading partners, indicating there is a sustained demand for better inventory management collaboration.

"VMI is primed for a great leap forward. Thinking outside of yesterday’s manual and ERP boxes, VMI needs a business network connecting all trading partners with near real-time inventory information, and tools for collaboration on forecasts and orders," Rollings said. "And it needs to be multi-tier in nature because the greater the visibility and collaboration with suppliers’ suppliers, the better the planning, the better the execution, and the better the ability to collaboratively problem-solve when disruptions occur – and they typically are caused by problems in the tiers beyond the prime supplier."