Vendor Managed Inventory, also known as VMI, is an effective strategy for companies to better manage their supply chain needs. In this article, we will take a closer look at how VMI can help streamline your inventory management processes while also reducing overall administrative costs. Ready? Let’s dive right in!

What is vendor managed inventory?

Vendor managed inventory refers to a supply chain strategy in which a supplier of goods assumes responsibility for the management, supervision, and optimization of a business’s inventory. In a typical VMI arrangement, vendors handle every aspect of a business’s inventory to ensure that they maintain enough stock to satisfy customer demand. Put simply, vendor managed inventories are owned by the vendor but are located and sold at a business’s premises.

To help you better understand the concept of vendor managed inventory, check out this example:

Let’s say a hypothetical superstore named KickMart has an existing VMI relationship with Hisense USA. In this case, the vendor is Hisense USA and the client is KickMart. Hisense USA supplies KickMart with various types of home appliances and makes sure that KickMart maintains optimum stock levels.

For a VMI partnership to be successful, both parties need to establish data-sharing practices to make sure that replenishment calculations are relevant and accurate. The ultimate goal of VMI is to create a seamless process that determines the appropriate re-order quantity based on current demand and agreed-upon stocking levels.

How does vendor managed inventory work?

• Set expectations. Much like most business relationships, both the vendor and the customer need to agree on specific goals that would define the success of their VMI partnership. This would provide the necessary foundation and structure to the partnership and determine clear roles and responsibilities for each party.
• Maintain constant communication. For a VMI relationship to work, a close strategic relationship needs to exist between both parties to make sure that necessary information is accessible. Sustained communication fosters increased transparency and mitigates the risk of stockouts or overstocking.
• Continuous improvement. To optimize important inventory management processes, a VMI partnership should also enable the vendor and the client to freely discuss rooms for improvement. Identifying gaps in your supply chain process allows you to quickly react to market changes and address possible areas of concern.

What is the main difference between vendor managed inventory and traditional inventory management?

The main difference between VMI and traditional inventory management is the way inventory is handled. When it comes to traditional inventory management, a business handles every aspect of the inventory management process from sales forecasting to order fulfillment. On the other hand, a vendor managed inventory shifts the responsibility of inventory management and logistics entirely to the vendor. Customers that partner with a vendor managed inventory services provider enjoy multiple benefits from lower costs to more efficient forecasting capabilities.

Is vendor managed inventory right for you?

If you are a rapidly growing business that manages complex inventory levels and seasonally experience spikes in demand, then a vendor managed inventory strategy may be right for you. A VMI provider can help you streamline your auditing processes to make sure that you are holding just the right amount of inventory at any given time. Some of the biggest retailers that use VMI are Walmart, Bosch, Home Depot, and Amazon.

What are the benefits of vendor managed inventory?

Optimal Stock Levels – When done correctly, vendor managed inventory enables businesses to optimize their stock levels by aligning inventory replenishment practices with existing and potential customer demand. By establishing a seamless inventory management system with a VMI partner, businesses can mitigate the risks surrounding stock levels and only carry the right amount of products.

Improved Forecasting Ability – Another benefit of partnering with a VMI provider is improved demand forecasting for all products. Through the exchange of important sales and demand forecasting data, you and your VMI partner can anticipate trends, sales patterns, and future demand more effectively.

Lower Costs – From lower carrying costs to more efficient inventory management costs, having a VMI partner allows businesses to reduce various supply chain expenses. The vendor managed inventory model also saves businesses money by placing bulk orders which usually secures better discounts.

Improved Data Insights – Along with improving your forecasting ability, partnering with a VMI provider means better data and technology sharing between both parties. This translates into improved data insights which, in return, fosters continuous improvement.

Are there risks involved in the vendor managed inventory process?

Unreliable Supplier – Like most business partnerships, an unreliable partner could spell disaster for your operations. This may sound harsh but you’d be surprised at the number of unreliable suppliers out there. While it takes time to build a trusting relationship, there are some questions you could ask your potential vendor to make sure that you are choosing the right partner:

• Have you ever partnered with similar businesses?
• What are your technological capabilities? Will it integrate seamlessly with our processes?
• Will you be able to come up with a strategic inventory management plan?
• What type of communication channels do you prefer?
• Will you be able to personalize and scale our processes in case we grow and expand?

Data Exposure – One significant disadvantage, when working with a third-party provider, is an increased vulnerability from data exposure. And when it comes to working with a VMI, it’s no different. As mentioned above, a VMI partnership only works when both parties establish data-sharing processes that would shed light on gaps in the supply chain processes. However, it also poses security concerns wherein data may be shared with other parties without the business’s consent. While definitely rare, it’s still something to keep in mind before partnering with a vendor managed inventory provider.

Slow Market Response – Changes in customer preferences and the overall market are, at times, impossible to predict. When the market experiences sudden changes, it could be difficult to secure the inventory you need especially if your VMI partner cannot meet your requests due to other contractual obligations.

Are vendor managed inventory and consignment stock the same?

While both concepts sound similar, vendor managed inventory and consignment are two different business principles. The biggest difference between the two is that consignment is a business arrangement that enables a consignee to sell a consignor’s goods. The consignor maintains ownership of the products and is paid by the consignee when inventory is sold. On the other hand, vendor managed inventory is a strategy that shifts the inventory management responsibility from the business to the vendor.

Are there alternatives to VMI?

By now, you may have an idea about what vendor managed inventory really is and the benefits that it can bring to your company. However, if you think a VMI partnership is not right for your business, there are other ways to properly secure and manage your inventory depending on your needs. Take consignment inventory for example. Consignment inventory is a cost-effective way for businesses to maintain stock levels at their stores without the need to pay for the products upfront. It’s a great way to keep your business running while ensuring a predictable cash flow.

If you’re looking for an alternative to vendor inventory financing, check out Kickfurther. Kickfurther is a unique type of inventory consignment platform that helps businesses fund their inventory needs through the help of supporters and fans. Inventory is often offered as a consignment opportunity or Co-Op wherein individual backers can participate in crowdfunding campaigns and, when inventory is sold, businesses pay their investors instead of the bank.

Wrapping Up

As a business, it’s important to regard vendor managed inventory partnerships as a highly collaborative business relationship. When choosing a VMI partner, make sure that they have the necessary industry know-how and the technological capability to be able to cater to your business’s unique needs. In addition, find a vendor that will help you tackle supply chain challenges as well as present opportunities that will help your business thrive and succeed.

Achieving efficiency is critical for small businesses to operate lean and be successful. Resources are valuable, and if wasted, it can cost your small business more money than you think. Five dollars here and five dollars there adds up, especially over time. Inefficiencies can result in more damages than just a loss of money. As you find ways to grow your business, it may be tempting to just find the easiest way to make things work rather than the most efficient way. However, sooner rather than later, you should evaluate how efficient your small business is. Whether you are just starting a business or have a well established small business, there are several free tools to help your small business achieve efficiency. Explore the list of tools below and try the tools you think your business will benefit the most from, you won’t regret it. 

What are some benefits of running an efficient small business?

Inefficiencies can cause a domino effect of negative consequences. As your business grows, inefficiencies can eventually cause it to fail or impact profitability. While in pursuit of running an efficient business, you are likely to uncover several benefits as you make effective changes. The changes might not happen right away and they might not be so obvious you don’t have to look for them. Being aware of the benefits of efficiency can help you recognize these positive changes faster. Here are some benefits of running an efficient small business.. . .

#1. Being efficient can increase revenue

Each year businesses waste 20% to 30% of revenue on inefficiencies. Have you ever wondered what your company could do with an extra 20% of revenue? You can easily find out by refining processes to achieve efficiency. Keep in mind that efficiency is not just a result of finding the most efficient way to do things. Efficiency also stems from paying employees a living wage and producing quality products. Doing things the right way is a critical step toward achieving efficiency. 

#2. Being efficient improves time management

In our professional and personal lives, time can be measured in terms of potential output, not just minutes and hours. For example, you may have one employee that can produce 10 reports in an hour constantly. While you may have another employee that can only produce 8 reports.  One employee is more efficient than the other, thus improving their output. So why is one employee more efficient? Do you pay them more? Do they have a better manager? Or are they just simply a better worker? Determining what is influencing results can help your business be more efficient.

#3. Being efficient improves quality 

Top Quality Management and Six Sigma provides methodologies that remind us that defects or missed quality benchmarks are a result of inefficiencies. If this is true, then improving efficiency should improve quality too. Inefficiencies may be in the form of disgruntled employees or old equipment. Oftentimes when business owners and managers evaluate efficiency they zone in on the actual process. However, when evaluating efficiency everything from equipment to employees to the environment should be evaluated. Increasing quality results can make a business more successful and efficient. 

#4. Being efficient improves morale

As we mentioned earlier, inefficiencies can have a domino effect. As a result of inefficiencies employees may have a lack of trust. For example, when a company makes project announcements with no follow up or follow through, employees may develop a sense of doubt. Eventually this sense of doubt can turn into a lack of trust. If the employee feels that they can rely on what their employer tells them, they may be less motivated to perform. As a result, the employee may create inefficiencies. This is just one example of how inefficient can affect morale. 

5 Free tools that can help your small business improve efficiency

Small businesses are often strapped for cash. The more free resources a small business takes advantage of, the better. From creating your own website to recruiting employees, there are several free tools available for small businesses. Whether you can afford to take risks or not, we encourage you to try some of the free tools listed below. Here are 5 free tools that can help your small business improve efficiency. . .

#1. Wix

Creating a website that is user friendly can improve sales and efficiency. Whether you primarily sell products through online platforms such as Amazon or have a storefront, you should have a website. Websites can increase credibility and help drive traffic to your brand. Offering customers an efficient, quick, and to the point website can improve your overall brand. Wix offers businesses a platform to design and build high-quality websites. You can start by using the free plan and if it goes well, you can opt to use the Wix web hosting provider. At Wix, you can choose from over 500 professionally designed website templates.

#2. HootSuite

Social media provides businesses with endless opportunities to connect with the community and boost brand awareness. It allows businesses to show off their personality as well as their products. However, hiring a professional to manage your social media account or finding time every day to log on and create content may be costly and or challenging. This is where HootSuite comes in. Hootsuite provides a user friendly and free dashboard that allows businesses to schedule social media posts. Now you can invest a few hours once a week or once a month to manage multiple social networks, schedule posts, and communicate with followers.

#3. Google Sheets or Google Docs

Staying up to date with the latest version of Excel and Microsoft Word can be costly. In addition, it may be inefficient to have to send out updated versions of documents. Once you start using Google Sheets and Google Docs, you will likely never use anything else. Google Docs and Google Sheets are free to use and can be shared and accessible by anyone with a Gmail account (which is also free). You and your team can view and edit documents together from remote locations. It doesn’t get much more efficient than that.

#4. Survey Monkey

Gathering feedback from customers can improve business efficiency and performance. Survey Monkey offers a free basic plan that allows businesses to create and send surveys with up to 10 questions. Under the free plan, you can view up to 40 responses per survey. If you want to view more you’ll need to upgrade. However, some feedback is better than none. Survey Monkey offers affordable plans for small and large businesses. If you are wondering if your customers are actually satisfied, uncover the true answer at Survey Monkey.

#5. Zoho

Effectively managing project and business ideas is critical for efficient operation. While Zoho has pay as you go plans, they also offer a free edition of their flagship CRM software. Zoho allows users to communicate and collaborate with customers, providers, and employees in regards to certain projects. This allows entrepreneurs to stay on track and execute ideas and projects. In addition, Zoho can backup information since it’s a cloud application. There are a variety of features that we encourage you to explore after you take advantage of Zoho’s free edition.

Conclusion

There is really only an upside to running an efficient business. While it may require serious focus and a time investment, improving efficiency should be at the center of your everyday practices. If you want to grow your business, efficiency is key. If you are a retailer, managing inventory efficiently will be critical. For small businesses that may be low on capitol, Kickfurther can provide affordable inventory financing. Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules, allowing your brand to scale quickly without impeding your ability to maintain inventory or financial flexibility.

Improve inventory management. . . apply for affordable inventory financing today!

Businesses and suppliers share a relationship that is dependent on one another. Without suppliers, most businesses would not be able to profit and run a respectable establishment. As a business owner, it’s critical to find a supplier with quality products and fair prices that is easy to work with and reliable. As a supplier, it’s critical to find businesses that can place consistent orders, pay on time, and simply just be a great customer. It’s tempting for business owners to hound suppliers for cheaper and cheaper prices. However, business owners should be aware that they most likely chose their supplier due to more factors than price. As you sift through suppliers you usually order samples to check quality. In addition, you may be willing to pay a little more for a supplier that communicates well and does what they say. The moral here is to take care of your supplier, it’s important that both of you can be profitable and operate seamlessly. Keep reading to learn more about building great relationships with suppliers.

5 ways to maintain a superior relationship with your supplier

Doing business with others is always a two-way street. Building a relationship with a supplier starts from the minute you reach out to inquire about their products and services. You want to be thoughtful, flexible, and fair in your suggestions. You want the supplier to want to work with you just as much as you want to work with them. Keep in mind that just because you are a paying customer for the supplier, they have other accounts too. So how can you build and maintain a great relationship with a supplier? Here are 5 ways you can maintain a superior relationship with your supplier. . .

#1. Understand and acknowledge the needs of your supplier

As you begin working with a supplier, it should be clear that they have certain practices in place. Whether they prefer paperwork, payment, or any other exchange done a certain way, you should ensure to follow their normal protocol. Avoid asking your supplier to change the way they do things to make it easier for you. If you are working with a well-established supplier, they probably already know how things work best internally. Being easy to work with can make you a more desirable account for a supplier. If the supplier requests any information from you, you should provide it in a timely manner. 

#2. Communicate effectively

While most of your interactions with a supplier are business related, keep in mind they are humans too. Maintaining a professional relationship is important. However, getting to know a few personal things  (if they are willing to share) about your supplier or their employee can help you build a stronger relationship. Any communication with your supplier should be well thought, clear, and concise. Try using fewer words to deliver the same message. The less words you use, the less time it takes them to read the communication. While some suppliers may be in another country, taking the time to meet them face-to-face can go a long way. If you get the chance to meet your supplier face-to-face this can be a great time to develop innovative ways to make each parties job easier. 

#3. Be loyal

In the business world, it’s easy to get burned. Suppliers can tell which business owners are only concerned about themselves and their business. If you want to work with a supplier that respects you and your business, you’ll have to put some work in. Showing your supplier that you understand the relationship is a two-way street is a good start. However, as the relationship develops find ways to reward your supplier with loyalty. Reassure them that you appreciate the work they do and let them know you are there to stay. If suppliers feel like customers are not just chasing the best deal, it’s likely that they will make you a priority over other customers. 

#4. Choose the right suppliers

Before you start the search for a great supplier, you should list a few qualities and values that are important for them to share with you. Finding a supplier that is the right fit is important for a successful long-lasting relationship. In addition, make sure the supplier can offer the products you need. While you may come across suppliers offering unreal prices, if they are not capable of fulfilling your orders, you may be in trouble. Before officially selecting a supplier, do your research and know who you are dealing with. Reviews, testimonials, and word-of-mouth can be a great way to discover the true colors of a supplier. Avoid ignoring doubts because you are being bribed by an unreal price. Follow your intuition. 

#5. Refer business

While it may be tempting to keep your supplier all to yourself, remember, it’s a two-way street. Your supplier probably needs more great customers like yourself. If they are able to grow their orders consistently, they may even be able to deliver cheaper prices. If you are thrilled with your supplier, refer business to them. If you don’t have anyone to refer to, you can always leave them reviews or offer to speak to potential customers for them and put in a good word. You may even find that they will refer customers to your business in return. Afterall, the relationship is a two-way street, right?

Where can I find great suppliers?

Finding a great supplier can be challenging. While the Internet is full of suggestions, it can be hard to believe everything you come across. Asking other business owners for referrals can be an effective way to discover great suppliers. In addition, you may be able to use sites such as Alibaba to connect with suppliers. However, if you prefer a supplier based in the United States, Alibaba is probably not the best site to turn to. Here’s a Google tip from a research expert – use multiple search engines. Does all the information you find match up? If so, you may be on the right track. It may be helpful to search specifically for suppliers within your industry rather than just searching for suppliers in general. 

How can Kickfurther help with inventory financing?

While you may be able to find a great supplier, if you don’t have the funds to place an order, you may be at a dead end. Inventory financing may seem like the obvious solution. However, as you start to research inventory financing, you may be at a loss for why it’s so expensive. After hopelessly searching for affordable inventory financing, an entrepreneur, just like yourself, created Kickfurther. Luckily, now business owners and entrepreneurs have access to affordable inventory financing. So how does it work?

Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules, allowing your brand to scale quickly without impeding your ability to maintain inventory or financial flexibility.

Discover affordable inventory financing. . . apply online today!

Understanding how to increase profit margins is critical as a business owner or entrepreneur. Offering competitive prices and quality products while maintaining sustainable profit margins is key. So what is a reasonable or good profit margin for a small business? What is considered good or reasonable profit margins, usually varies depending on the industry and size of the business. It can also depend on the goals of the business and the owner. A tip of advice from a seasoned business owner, never get greedy. Strive for fair. While we love huge profit margins, you should never cut corners to achieve them. Taking shortcuts to produce larger profits will likely catch up with you one day and could cost you. With that being said, as a business owner you should always be searching for ways to increase operating profit margins. Let’s dive into how to increase profit margins and maintain healthy cash flow. 

How Do You Calculate Net Profit Margin?

Tracking revenues and cash flows using accurate data is an essential part of knowing what your actual profits are. Oftentimes, small business owners may try to estimate expenses and profits or omit certain activities to make their business appear profitable. While this may help you sleep at night, it’s not a sustainable business practice. If you are trying to drill down profit margins you should be considering all expenses. Net profit margin is the amount of profit your business generates expressed as a percentage of total revenue. Net profit margin should be tracked on a profit and loss statement. Here is a basic formula for calculating net profit margin:

Total Revenues

Less: COGS

= Gross Profit

Less: Total Expenses

= Earnings Before Tax

Less: Taxes

= Net Earnings

What Is Cash Flow?

Managing the finances for a business may be more complex than you imagined. While your profits may be higher than your expenses, you may still have cash flow problems. For most businesses, money is constantly coming in and out, this is known as cash flow. At all times, you want to ensure that your business accounts have sufficient balances to cover debits. For businesses required to hold inventory, cash flow may be challenging. In addition, if you are selling products through other platforms or retailers, there may be a lag in payment. So how do you keep inventory stocked without depleting all of your cash flow? 

Small businesses often need to use inventory financing to keep cash flow healthy and profits growing. However, inventory financing can take away from the bottom line. In addition, it can be difficult for some businesses to qualify. Small businesses that need affordable and flexible inventory financing should visit Kickfurther. A little later on we will provide more color on how Kickfurther can help your business increase profit margins. 

5 Ways To Increase Profit Margins

As a business owner you have a lot of things on your plate to worry about. While you may be able to hire good help, it’s rare to find anyone more committed to your business than yourself. Business owners must find a way to keep an eye on operations without losing sight of what’s best for their business. If you notice that profit margins are suffering, it may be necessary to boost your top line. If your business has a loyal customer base that orders frequently, you may owe them an explanation as to why prices are increasing. Use your judgement here. And remember, customers appreciate communication and should want the business they admire to thrive. Let’s take a look at 5 ways businesses can increase profit margins. . .

#1. Focus on branding and perceived value

Creating personal and emotional connections with customers can help increase profit margins. Why should they choose your product over your competitor? What does your brand do for them? Do you share mutual interests such as focusing on eco-friendly solutions or giving back to charity?  There are many brands out there that can sell for higher prices than competitors simply because customers prefer their brand and are willing to pay more for it. 

#2. Find ways to increase average order size

Effective marketing and customer loyalty programs can help you increase profit margins. Once a customer arrives in your store, on your website, or on your product, you have probably already invested money to get them to this point. Now, you need to find a way to maximize their spending. For example, you could suggest products that are frequently purchased together or offer free shipping for spending over a certain amount. Online clothing retailers often have suggestions for how to complete your look featuring purses, jewelry, or shoes. Find the solution that works for your business, even if it means plenty of rounds of trial and error. 

#3. Be creative with pricing

When consumers purchase products they usually find a few products that meet their needs. One of the last details they may refer to is the price. At this point, the price of your product can often make or break the sale. If you plan to sell at a higher price point than competitors, even if it’s just slightly, you should provide clear reasons as to why a consumer should purchase your product. Consumers often already believe that a higher priced product is higher quality too. In reality, this is not always the case but marketing can sure make it seem like this is the case. 

#4. Build relationships with vendors

Vendors and business owners share mutual interests, you are both in business to make money, but you need each other to achieve the goal. Increasing sales and profits could potentially benefit both of you. Vendors and business owners should communicate to find ways to make things more cost-effective for both parties. Working closely with vendors can establish stronger relationships that can increase profit margins. 

#5. Be thoughtful about discounting products

Once we find a brand or product we love, we usually wait for it to go on sale. But what happens when the item you are dying to purchase runs out before hitting the sale rack? For some brands, this is a recurring theme that motivates customers to purchase items for full price. If customers know products are likely to be marked down with plenty of supply available, they will probably wait to purchase them on sale. Personalized offers or an annual sale may help move inventory while increasing profit margins. After a customer has built their cart, you could send them a coupon for a small discount. This is tactful and does not advertise to the world that your product can easily be purchased for less money. Furthermore, holding one annual sale, can grab customers’ attention and excite them without taking away from the now. If they love your brand they will likely shop your sale but probably won’t wait to purchase products until then.

What Is An Average Profit Margin For a Retail Business?

In the retail world, average profit margins are about 53.33%. Figuring out an appropriate profit margin for your business can include many variables. First off, you’ll need to determine what you can sell your product for. You’ll also need to determine what you can acquire or make the product for. Don’t forget transportation, storage, and other expenses you may incur. While this sounds pretty simple, it’s not. Determining profit margins and building a competitive business requires creativity, innovation, and dedication. There may be times you want to just give up, but then the voice in your head reminds you of how far you have already come. If you feel defeated, take a step back and hang in there, if it makes sense. If you can be successful, business ownership can be so rewarding. 

Conclusion

Profits are important for business. As a business, you are there to make money while satisfying customers. Finding a healthy way to take care of employees and customers while remaining profitable is key for success. Most small businesses need some type of inventory financing, regardless of how established they are. Inventory financing often sounds like an easy answer for stocking products but it can be costly. After searching hopelessly for affordable inventory financing, Kickfurther was founded by an entrepreneur just like yourself. Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules, allowing your brand to scale quickly without impeding your ability to maintain inventory or financial flexibility.

Searching for affordable inventory financing? Check out Kickfurther today!