ReAgent has always been focused on improving relations with any new or existing customers. We will always maximise our efforts to ensure that any relationship works as efficiently and effectively as both parties would want.
We have been trading with a key blue chip automotive customer in China for over 12 months now and the business has grown steadily. Current logistics agreement was Ex-works our facility in Runcorn. This meant that the customer arranged the collections and paid for the freight. This caused the customer some difficulties regarding stock control and also exposed them to a large amount of inventory due to the six week shipping time from date of purchase to receipt of materials.
We went to China to visit the customer to better understand how we could improve our offering to them and help them out. Following this meeting we agreed to look into a VMI (Vendor Managed Inventory) logistics process.
In this post:
What is VMI?
VMI stands for Vendor Managed Inventory. It’s a system in which the buyer of a product provides information to the supplier about how the inventory of that product should be managed. The supplier takes full responsibility for managing the agreed inventory of the product(s). This extremely popular business model has been adopted by some of the largest manufacturers and suppliers across the world.
Why is VMI attractive to the customer?
Under VMI, ReAgent will ship the goods into a bonded warehouse in Shanghai, China and store them until the customer places an order to call them off. ReAgent will keep a minimum of two weeks stock in the warehouse and we will arrange all of the logistics. ReAgent will also pay for the transport, storage and insurance and cover the cost of the inventory. These were terms that were agreed upon by both parties, during the arrangement of this deal.
Implementing a new system, such as a VMI, not only needs to work for both parties, but it also needs to be a respected mutual arrangement. The arrangement that has been put in place was agreed upon after ReAgent took a trip to Shanghai back in November 2016.
The benefits to the customer are as follows:-
- Reduced inventory (Customer only liable for materials that they have collected)
- Improved Cash flow (Goods invoiced 1-2 days prior to receipt rather than six weeks)
- Shorter lead-time (from six weeks to 1-2 days)
- Less work managing shipments (This will be handled by ReAgent)
We have worked with a UK freight company who has fortuitously opened a Shanghai office to source a suitable supply chain and storage facility. The products supplied are temperature sensitive and must be transported and stored between 5° C and 35°C. ReAgent have arranged a visit to audit the storage facility and meet the Shanghai logistics provider in mid March 2017
The move to VMI model of deliveries will commence From May 2017.
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