IoT Business Case: Vendor Managed Inventory

Our next IoT business case paradigm focuses on managing inventory and cash flow on behalf of customers.

With Vendor Managed Inventory, suppliers own and maintain their products until customers use them, even though the inventory is stored at the customer’s point of consumption. Once the customer uses the product, the vendor charges them for it.

One common way to manage inventory on behalf of a customer is through smart shelves. These shelves can measure the type and quantity of products placed on them. Items are tagged with RFID tags, allowing the shelves to sense when products are added, removed or used.

There are many ways to support Vendor Managed Inventory. Companies can use barcodes, RFID tags or product-specific solutions such as measuring the flow of a liquid product, the weight of a bulk product or even the height of a pile for materials like salt, grain or coal.

Here are some examples of Vendor Managed Inventory in action:

• Stents or other implantable devices can be owned and stocked by the medical device supplier until they are scanned out and used by the hospital.
• Beverage distributors may own the liquor or soda until the restaurant or bar pours it.
• Pallets of paint can be stored at hardware stores so they have all the colors they need, while the inventory remains owned by the supplier until it is removed.
• Roofing shingles can be owned by the manufacturer until the contractor brings them to the work site, allowing the contractor to buy only what they need.
• Hotel room minibars can charge guests for items that are removed, often calculated by weight.

If we tie Vendor Managed Inventory back to the business drivers — 1) Make money, 2) Save money, 3) Legal compliance, and 4) Reputation protection — the advantages for both supplier and customer become clear. The supplier can increase brand loyalty, improve the customer experience and drive revenue by having products on-site when the customer needs them. The customer benefits by only paying for what they need when they need it. It also creates an effective way to control inventory, bill accurately and restock only when necessary.

When done effectively, Vendor Managed Inventory can be a beneficial arrangement for suppliers and their customers while also creating a better experience for the end user. At F3, we can help vendors determine whether this is a feasible option and identify the right technology to support it.

Check out our first blog post for the 10 common IoT business paradigms we’ve encountered most through the years.