Vendor Managed Inventory in Mexico benefits manufacturers
On March 27th and 28th, 2014, MexicoNow Magazine held its annual Manufacturing Supply Chain Summit in El Paso, Texas. The event consisted of a combination of conferences, one-on-one B2B matchmaking visits, as well as tours of select manufacturing plants in once of Mexico’s most prolific manufacturing centers: Ciudad Juarez.
Among the topics explored by one of the event’s numerous expert speakers was vendor managed inventory in Mexico. “Cutting Costs and Improving your Company’s Balance Using a VMI Model” was presented by Octavio Saavedra, The president and founder of EP Logistics, which is based in El Paso, Texas.
According to Saavedra, under the vendor managed inventory model in Mexico, “buyers and sellers establish collaborative replenishment processes” in order to reduce manufacturer’s inventory. This reduction of inventory saves manufacturers resources which then can be used more efficiently and effectively in their productive operations. Vendor managed inventory in Mexico consists of item that are owned by the supplier, until the time that they are pulled for use by the buyer (manufacturer). According to the president and CEO of EP Logistics, VMI programs in Mexico serve to:
- reduce the amount of inventory held in stock by both buyers and sellers
- increase overall volumes of business
- lower transaction costs for both parties to sales
Also, during the course of the presentation, Saavedra provided information to justify the initiation of a program of vendor managed inventory in Mexico. He pointed out that in Ciudad Juarez alone are located over 330 maquiladora manufacturing facilities, and that the average inventory value held in stock by these companies totals approximately US $12 million. Additionally, he stated that the financial benefits of having a vendor managed inventory in Mexico are financial, operational and, sometimes, intangible in nature. Among other advantages having a VMI program in Mexico enables companies to achieve:
- healthier cash flow
- better terms of payment
- reduced costs for rush shipments
- reduced logistics personnel
- close proximity of material inputs
- better planning
- advantageous use of valuable production space
- lower customs risk
Programs for vendor managed inventory in Mexico should be contemplated by all manufacturers. Incorporating such programs into a company’s Mexican supply chain solution can serve to make it more efficient, agile and profitable.
LINK BELOW TO PRESENTATION: