OUTSOURCING WEIGHED AS VMI STRATEGY

MINA WILLIAMS

SAN FRANCISCO -- Should brand marketers set up vendor-managed inventory programs by themselves, or outsource the work?

Before deciding, evaluate how much time you have to bring forward a solution, recommended Tony Ferrante, manager of customer service logistics for the Home Products division of Rubbermaid, Wooster, Ohio.

"Outsourcing is a viable option when the benefit you are seeking is quick implementation," he said. "Outside VMI specialists know what retailers are doing and have experience. They know how to do quick cost structures that could be favorable for consumers with limited stockkeeping units."

Ferrante explained the options and his company's experience here at a VMI conference sponsored by the Institute for International Research, New York. There are several times when outsourcing makes sense for manufacturers, Ferrante said. Two are pressure from a retailer to get running quickly, and adjusting to the large customers that have taken over replenishment of distribution centers. "When enhancements are not within your control, or your group is not receptive to making enhancements or adding cost, outside specialists can help," he said. "If you are looking to get to store-level management or integration into an existing system, or you have a favorable turn but need process improvements, outside specialists can help."

Some manufacturers are challenged in terms of numbers of retailer customers that will be part of a VMI program or by the customers that have a limited number of SKUs, he said. Both make the investment in a system cost-prohibitive, and lead to considering outsourcing.

Rubbermaid has sought a combination of in-house and outsourced solutions, he said, chiefly because retailers were handling the replenishment side. Plus, because of the seasonal side of Rubbermaid's business and the use of sale events, not all software would work.

Rubbermaid entered into a partnership with IBM in 1991, explained Ferrante. Kmart, a major customer, wanted vendors to get up and running with electronic data interchange. Users dialed in via an IBM network. IBM provided EDI support.

"We went with E3 criteria integrated with the existing system to support both distribution center and store-level replenishment," he said, referring to E3 Associates, Atlanta, Rubbermaid's software vendor. "The system has promotional management capabilities, ease of use, support services and ad hoc reporting capabilities using an E3Crisp." An AS/400 system is used since replenishment systems are the sole business and it functionally met requirements of ease of use supported by research and development, according to Ferrante.