Letting a supplier run part of your storeroom

Vendor managed inventory means a supplier keeps agreed items stocked on your site and invoices on use or on a cycle. For consumables it removes a large amount of low-value administration. For critical spares it hands over a decision you should be making.

What works well under this arrangement

• •Fasteners, fixings and general consumables
• •Personal protective equipment
• •Lubricants and cleaning materials
• •Standard electrical items: fuses, cable, terminals, lamps
• •Filters and belts in common sizes

These share three properties: many small transactions, low unit value, and a stockout that costs an hour rather than a day.

What to keep yourself

Anything where the stocking decision is a risk decision. Critical spares, long lead time items, and anything specific to equipment that stops the business. Those decisions belong to whoever owns the consequence of the machine being down.

Three things to insist on in the agreement

• •Visibility: you see what is held and what was used, in your own system, not only in theirs
• •Price transparency: the mechanism for price changes is written down, because this is where the value quietly leaks
• •An exit: what happens to the stock, and at what price, if you end the arrangement

Watch the consumption, not just the invoice

The failure mode is not overcharging. It is quiet growth: usage of consumables rising year on year because nobody is looking, since nobody is placing orders any more. Review consumption by item annually against the previous year, exactly as you would if you were buying it yourself.

Keep the usage data

Parts used against equipment is maintenance history, whoever owns the shelf. If the arrangement means consumption is only visible in the supplier’s system, you have outsourced a piece of your own failure record, and you will want it back the first time you analyse a bad actor.