New Vendor Managed Inventory Software Is Changing The Equation

Part three of this four-part article explores how technology has changed VMI.

VMI software manufacturers would have you believe VMI is a no-brainer. And, frankly, so would Truitt, the distributor. That’s especially been the case as VMI software has advanced.

“We’ve been very fortunate in the last five or six years, and we’ve had double digit increases year after year,” says Truitt. “What [new VMI software] has enabled me to do is to enjoy those double digit increases without adding additional headcount from a sales support standpoint.”

The old formula, he says, was that every time a distributor added a couple million dollars in sales, it had to add another customer service associate.

“Those days are gone,” says Truitt. “We can’t afford that anymore. So if you’re not able to find solutions from technology to get around that, then you won’t survive very long.”

Also long gone are the days of taking inventory on an order pad. That was replaced by VMI software that every sales rep could download on his or her smartphone or company-provided tablet. But, as is always the case, technology has kept advancing. The quality of cameras in smartphones and tablets is now to the point where some VMI software companies have created apps that allow distributor sales reps to enter an end user’s storeroom and move down the shelf, scanning barcodes for each product instead of searching for each product on a list. Once scanned, the sales rep can quickly enter the appropriate inventory information for that product, and then move on to the next product on the shelf.

“Everyone’s walking around with a smartphone these days,” says Waller. “If you go back a couple of years ago, or even less, the phones were too slow or the cameras weren’t good enough to scan a barcode.”

Although the new VMI software technology has made counting inventory more efficient for distributor sales reps, they still have to go out and physically count their customers’ inventory. There aren’t many end users that electronically monitor their inventory, making entirely automated inventory management unrealistic at this point, says Waller.

It’s hard to quantify, but with VMI, distributor sales reps take on at least some additional work because of the time it takes to count their customers’ inventory. This brings up a fair question: With VMI, is it necessary for distributors to hire a larger sales force?

For Sikes Paper’s sales reps, counting inventory increases their call time by about seven or eight minutes, says Truitt.

“You are utilizing more of their time, so it does require a little bit larger sales force,” he says. “But it’s not as much as you think. The software tools are basically saving you in your internal support — people processing orders.”

This, says Waller, is what DDI most often finds: The workforce shifts, and order processors are replaced with sales support out in the field — a shift that benefits most distributors.