Work out vendor managed inventory benefit instantly with clear inputs, formula shown and shareable results.
Vendor managed inventory delivers a one-off cash release from lower stock plus two recurring benefits: reduced holding cost on the smaller balance and fewer stockouts because the supplier sees real consumption data. Both must be quantified for the business case to stand up.
Cash released
Released = Current inventory value x Expected reduction %
Annual benefit
Benefit = Cash released x Holding cost rate % + Stockout cost saving
Because the supplier replenishes against actual consumption rather than against your forecast, which removes a layer of forecast error and its associated buffer.
Visibility of real demand, which lets them plan production better and hold less of their own finished stock. The gain is genuinely mutual.