Vendor managed inventory for manufacturers that sell through distributors
With vendor managed inventory (VMI), you plan the stock at your distributors.
The VMI module in Trade Data Hub, part of Asseco Platform, takes the daily sales and stock of each distributor branch (one of the distributor’s warehouses, central or regional) and calculates a suggested order: the quantity of each product to deliver to that branch. The distributor can change the quantities and approves every order.
The module plans smaller deliveries at a regular rhythm, so days at zero stock become rarer. When your product is in stock more often, fewer pharmacy and store orders go to a competitor.
The definition
What is vendor managed inventory?
Vendor managed inventory is a model in which the supplier plans the stock at its customer’s warehouse. The customer shares its sales and stock data, and the supplier calculates what to deliver.
For a manufacturer of FMCG or pharmaceutical products, this means you plan the deliveries to each distributor branch. For every branch the VMI module calculates a suggested order from that branch’s sales and stock.
| A standard distributor order | Vendor managed inventory in Asseco Platform | |
|---|---|---|
| Who calculates the order | The distributor’s buyer | The manufacturer, as a suggested order for each branch |
| What it is built on | The distributor’s own estimate of its stock | Daily sales and stock for each branch, plus your demand forecast |
| Who approves it | The distributor | The distributor |
| Delivery rhythm | Large, infrequent orders | Smaller deliveries at a regular rhythm |
The problem
Your product is either overstocked at the distributor or missing
When a distributor buys in large, infrequent orders, its stock moves in large steps. Right after a delivery the branch holds much more than it needs. Then the stock falls to zero and stays there until the next large order.
On those days, a pharmacy or store that orders your product often takes a substitute, often a competitor’s product. These are lost sales: orders you did not get because your product was out of stock. Nothing in your reports shows why that sale was lost.
Your forecast is built on what distributors ordered from you, so it follows their buying rhythm. Distributor sell-out (what pharmacies and stores bought from the distributor) is missing from it.
Same demand
The same demand, covered in two ways
In the chart, both cases deliver the same total volume over the same period, so the two can be compared. With VMI, days at zero stock are rarer, and the average stock line is lower.
How it works
From the distributor’s daily data to an approved order
The VMI module works in four steps, with a calculation adapted to your planning model.
The data
Sales and stock for each branch, every day
The distributor sends its sales and stock every day through the channels it already uses, and they arrive in Trade Data Hub. You add product data, your demand forecast, maximum stock levels and your own warehouse stock.
The suggested order
What each branch needs
The VMI module calculates the suggested order for every branch and product. You can edit it before you send it to the distributor, or set up a template that calculates new suggested orders on the day and at the time you choose.
The approval
The distributor decides
The distributor can change quantities and approves the order. Only an approved order goes to you for fulfilment.
The result
Documents and measures shared by both sides
Confirmations and invoices are exchanged electronically. You and the distributor see the same measures: days of stock (how long the stock will last at the current rate of sales) and days at zero stock (how often a branch reported no stock).
Illustrative. Calculated from the branch’s sales and stock reported up to yesterday, rounded to full cartons. The distributor has changed one line and approved the order.
Suggested order against the distributor’s approval
| Product | Stock | Days of stock | Suggested | Approved | Status |
|---|---|---|---|---|---|
| Cold and flu sachets, 10 pcs | 96 | 3 | 336 | 336 | as suggested |
| Pain relief tablets, 24 pcs | 210 | 6 | 252 | 252 | as suggested |
| Throat lozenges, 36 pcs | 40 | 2 | 288 | 240 | changed by distributor |
| Vitamin C effervescent, 20 pcs | 330 | 12 | 0 | 0 | no order needed |
| Baby shampoo, 300 ml | 120 | 5 | 144 | 144 | as suggested |
| Hand cream, 75 ml | 64 | 4 | 96 | 96 | as suggested |
Quantities in units, in multiples of a full carton. The approved order goes to fulfilment, and the confirmation and invoice come back electronically.
Planning rules
What the plan takes into account
These rules keep the suggested order realistic for each branch and product.
Seasonality and promotions
Set them for a branch, a product group, a brand or a single product. When rules exist at several levels, the more specific one applies. A promotion can run in selected branches only.
Full cartons and pallets
The plan rounds every suggested order to full cartons or pallets.
When you are out of stock yourself
The plan can be set up so that it suggests no order for a product you have no stock of. When the product is back, the plan can rebuild the distributor’s stock in one order, even if the sales history shows zero.
Transfers between warehouses
The plan can suggest moving stock between the distributor’s branches, for example from the central warehouse to a regional one where the product sells.
An order limit agreed with the distributor
Where you agree it with the distributor, its own orders can be capped at the suggested quantity, so your team does not have to correct oversized orders by hand.
Unusual data left out
The plan can leave extreme values in the sales history out of the calculation, so a one-off spike does not distort the suggested order.
What each side gets
The benefits of vendor managed inventory for both sides
For you, the manufacturer
- Fewer days at zero stock at each branch, so fewer lost sales
- Daily distributor sell-out from every branch, so your forecast can follow what pharmacies and stores bought
- In markets where a few large distributors serve many manufacturers, you become a more important partner to the distributor, because you take over part of its stock planning
What you can offer your distributor
- Less stock for the same sales, so less capital is tied up in the warehouse
- Lower cost of storage, financing and insurance of stock
- Better service to the pharmacies and stores it supplies
For both
- Fewer errors, because orders, confirmations and invoices are exchanged electronically
- Fewer returns, because less excess stock builds up
- A regular delivery rhythm
You take on the planning of stock levels, and the distributor keeps the purchase decision.
In use
Deployed at pharmaceutical and beverage manufacturers
We have deployed vendor managed inventory at pharmaceutical manufacturers in Poland and at a beverage manufacturer. Each deployment has its own calculation, adapted to that company’s planning model.
VMI comes once a daily exchange of sales and stock data is running, and the distributor trusts that data and agrees to work with suggested orders.
One platform
One platform. Every moment in FMCG execution.
Our vendor managed inventory software is a module of Trade Data Hub, part of Asseco Platform, where data, planning, execution and settlement share one set of numbers.
Trade
Data Hub
VMI turns the daily sales and stock that Trade Data Hub collects into a suggested order for each branch. OTIF then measures how the distributor delivers.
Explore Trade Data HubRoute-to-Market
Optimization
Decide where to invest sales effort and where to grow.
- See where you can grow most across stores, bars and restaurants, then send your reps there
- Find the stores and territories you’re not reaching yet
- Plan promotions where they’ll pay off, before you launch
Sales & Retail
Execution
Help your field reps sell more in every store they visit, with less admin.
- Plan visits and optimize routes: more selling, less driving
- Take orders and run every in-store task
- Hit your shelf standards with Perfect Store, scored live on every visit
- Guide each rep to the next best action (RAO)
- Keep teams sharp with built-in Motivation and Coaching
- Launch promotions and check they’re live in store
Retail
Image Recognition
Automated shelf audit from a photo.
- See what’s on shelf: facings, share of shelf, out-of-stock
- Check planogram and price compliance instantly
- Verify promotions and displays went up as agreed
- Get fix-it actions while the rep is still in the store
Trade Terms
& Settlement
Agree commercial terms, then settle them on real numbers.
- Put all your trade terms in one place: targets, rebates, promo deals
- Track whether partners deliver, on time and in full (OTIF)
- Settle promotions and rebates automatically from real sales data
Questions
Vendor managed inventory between manufacturers and distributors
What is vendor managed inventory?
Vendor managed inventory (VMI) is a model in which the manufacturer plans how stock is replenished in its distributors’ warehouses, from each branch’s daily sales and stock. The distributor receives smaller deliveries at a regular rhythm. In Asseco Platform, the distributor approves every order.
Who decides the order in VMI, the manufacturer or the distributor?
The distributor. The manufacturer prepares the suggested order. The distributor can change the quantities, within any order limit the two have agreed, and approves the order before it is fulfilled.
What data does the distributor have to share?
Sales and stock for each branch, sent every day through the channels the distributor already uses. A vendor managed inventory system also needs the manufacturer’s product data, demand forecast, maximum stock levels and own warehouse stock.
What are the benefits of vendor managed inventory for the distributor?
The distributor holds less stock for the same sales, so less capital is tied up in the warehouse and the cost of storage, financing and insurance is lower. There are fewer returns, because less excess stock builds up, and fewer unplanned deliveries.
Can VMI handle promotions and seasonal demand?
Yes. Seasonality and promotions can be set for a branch, a product group, a brand or a single product. When rules exist at several levels, the more specific one applies.
What needs to be in place before VMI can start?
Daily sales and stock data from the distributor for each branch, and a distributor who agrees to work with suggested orders. That agreement is a commercial decision. It usually comes after the data exchange has run long enough for the distributor to trust the figures.
Check whether your distributors’ data is enough to start
Tell us which distributors you sell through and what they already send you about sales and stock at each branch. We will review it with you and show what is missing before VMI can start.
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