SBS recently conducted a survey to better understand the motivation behind the purchasing decision. Not surprisingly, respondents indicated that cost, lead time and quality were the 3 driving motivations. VMI capabilities ranked a distant 6th. But, VMI helps manage and reduce costs, lead times and quality issues. So shouldn't it be the driving force behind selecting a supplier?

1. Vendor Managed
Inventory: A tool for
streamlining inventory
management
A collaborative approach to
supplier/customer relationships

2. Table of Contents
§ Purpose of this book
§ What is VMI
§ The need for VMI
§ Benefits
§ Implementation
§ Case Study: The Problem, Solution and Results
§ Conclusion
§ Contact Us

3. Purpose of this eBook
SBS recently conducted a survey to better understand the motivation
behind the purchasing decision. Not surprisingly, respondents indicated
that cost, lead time and quality were the 3 driving motivations. VMI
capabilities ranked a distant 6th. But, VMI helps manage and reduce
costs, lead times and quality issues.
0%
2%
4%
6%
8%
10%
12%
14%
16%
The Driving Force for Selecting a Supplier
VMI should be
the driving
force for
selecting a
supplier

4. What is VMI?
Vendor managed inventory (VMI) is a
means of optimizing supply chain
performance by having the supplier be
responsible for maintaining the customer’s
inventory levels, by relying on a demand-
driven replenishment model.
“As a rule of thumb, 50 percent of your
total items that account for only 10-20%
of your inventory cost are candidates
for VMI services.”

5. The Need for VMI
VMI programs are implemented in order to streamline
inventory management, improve the purchasing process for
c-commodities, increase customer service levels and create
collaborative partnerships with suppliers.
“The increased globalization of supply
chain operations and the risks and
pressures associated with the global
economic environment has had a
significant impact on the need for
inventory visibility and efficiency, and has
fueled interest in VMI.”
-AMR Research

6. If not VMI, than what?
For manufacturers that do not employ a VMI program, inventory
shortages, quality issues, excessive purchase orders and excess
inventory continue to plague the manufacturing environment.
*as found in a
survey conducted
by SBS

7. Benefits of VMI
Under the SBS
VMI model, the
OEM no longer
needs to monitor
its production
forecasts in
order to trigger
replenishment
orders, SBS
assumes
responsibility.
¡ Direct connection between point of use and
the supplier reduces stock-outs and downtime
¡ You only take the product you need, when
you need it, to meet production demands
¡ Inventory levels are reduced throughout the
entire supply chain at the customer, supplier,
and at the upstream manufacturer
¡ Reduced costs through reduced
management and on-hand inventory
¡ Expediting and cancellations are eliminated
¡ The number of purchase order is decreased by
95%

8. Who can resist?
With VMI, the roles,
skills, trust and
power shifts, often
resulting in
resistance
during the
implementation
phase
QUESTIONS:
¡ If I no longer control it, will it work?
¡ Will VMI function well? Who is to blame
if it doesn’t?
¡ Will I run out of product?
¡ If someone else does this for me, what
will I do?
ANSWERS:
The right VMI supplier will help you control
costs, maintain proper inventory levels,
eliminate stock-outs, and save money!
Your job will shift to focus on more
strategic company initiatives.

9. The Keys to a Successful
Implementation
¡ Obtain commitment of senior management at both the customer and supplier level
¡ Define expectations, service levels and risks up front!
¡ Obtain tight integration with backend systems
¡ Forecast collaboration
¡ Establish and maintain transparency throughout the entire process
¡ Communicate operational guidelines and requirements across all relevant eternal
partners
¡ Align all organizations across mutual planning goals
¡ All parties must commit to their various roles and responsibilities
¡ Change management must be strictly enforced
Establish Appropriate KPIs and Measure, Measure, Measure!

10. An SBS case study:
Overcoming a Supply
Chain Challenge
Customer focus: Large
Semiconductor OEM

11. The Problem
A large semiconductor OEM needed to
overcome a supply chain with an excessively
large number of suppliers, low buying leverage,
extended lead times, and numerous stock-outs.
A Case
Study
The Review
With more than 8,000 unique parts, many with a
high volume and low dollar profile, the need
was clear for vendor consolidation and a
streamlined supply chain process.

12. The 6 Step Plan to Streamline
the Supply Chain
① Dedicated an experienced resource on site to guide the
conversion of this massive number of items.
② Evaluated all data
③ Consolidated 100 suppliers and 8000 part number to 1
supplier (Supplier consolidation from many to one vendor
revealed a double digit savings)
④ Routed thousands of SAP transactions to a supply base
maintaining PO line and quality integrity
⑤ Converted inventory items to a Point of Use VMI, critical to
the long term plan.
⑥ Implemented and monitored measurement metrics such
as on-time performance, inventory turns, PPV and quality.
A Case
Study

13. The SBS Solution
¡ Upon implementation, the VMI program was in
full gear handling thousands of floor locations
daily.
¡ 8,000 parts were immediately converted to SBS
and 9 vendors were eliminated.
¡ Customer purchasing was immediately able to
start focusing on the strategic items.
¡ Review processes were put in place to constantly
assess the mix of items to be managed by SBS.
A Case
Study

14. Fast Fact Results
¡ 1,331 active part numbers
¡ 5,108 active bin locations
¡ 17,391 PO lines
¡ 4M incoming Parts
¡ Purchase prices declined and have remained stable
over a five year period
¡ 97% of all items have lead times less than 30 days
¡ 99.97% on-time delivery
¡ 99.92% quality rating
¡ 1% favorable PPV (yr/yr)
A Case
Study

15. Conclusion
A VMI program can deliver direct
results to the bottom line. With
today’s capabilities and working
with a leading-edge VMI supplier
like SBS, the question is not whether
you can afford to implement a VMI
program—but whether you can
afford not to.
Contact us Today!
info@specialtybolt.com
800-322-7878

16. About SBS
SBS is a full-service solutions provider of
fasteners, vendor managed inventory
(VMI) programs and c-class commodities.
We manage the supply chain to lower
costs, reduce inventory and streamline the
supply base for our customers worldwide.
Contact us Today!
info@specialtybolt.com
800-322-7878
Providing the expertise to
manage the inventory of
your c-commodities so you
don't have to!