Assisted Inventory Management Advances

There has been much discussion and concern about retailers sharing sensitive store sales and inventory data with suppliers. However, many retail channels have found that supplier-retailer collaboration in this area can lead to mutual success. Below are definitions of current industry assisted inventory management programs.

Assisted Inventory Management:

Assisted Inventory Management, or AIM, describes a shared inventory management process whereby suppliers help retailers manage their inventory with shared goals to increase sales and profitability.

In the Christian Retail Channel, three AIM levels have been identified. The most basic level is retailers sharing sales information with a selected supplier. The intermediate level is sharing sales and inventory information with select suppliers, who would analyze product performance and make recommendations for orders and returns. The third level gives selected suppliers the ability to receive sales and inventory data and create orders and execute replenishment without direct retailer involvement.

At the intermediate and third levels, trading partners typically identify goals and evaluation measurements — called scorecards — to guide the AIM relationship. Those may include targeted sales or profitability goals, in-stock performance rates, return on inventory investment, or other performance benchmarks.

Vendor Managed Inventory:

Vendor Managed Inventory, or VMI, is a shared inventory management process whereby suppliers help retailers manage their inventory with shared goals to increase sales and profitability. VMI began in the grocery industry, but many retail segments now use it.

While smaller retailers often hesitate at sharing sales and inventory information with suppliers, recent Christian Retail Channel supplier-managed core inventory programs have demonstrated these programs can be successful. They identify top-selling products to optimize sales and inventory turns.

VMI challenges include having enough supplier resources and expertise to effectively optimize inventory performance. In larger supplier businesses, analytic teams are assigned to study data, plan replenishment, and make sales-demand forecasts. In smaller companies, sales reps may manage inventory and suggest or make orders. In some instances, large retailers assign supplier product-category “captains” to be responsible for a product category performance through VMI data-analysis processes.