The case study reveals that the biggest challenge faced by American Tool Works in implementing vendor management inventory (VMI) for their networks of small and mid-sized distributors is lack of technical capability to participate in this relationship. Large vendors have systems and structures that make implementation of this technological strategy possible. However, most of the small and mid-sized vendors have no technical capacity to monitor and automatically transmit the level of inventory to their suppliers.
It means that this task must be done manually, and this makes it impossible for ATW to monitor the way their stock moves in these small and mid-sized stores. As a result of this technological incapability, sometimes the stock of ATW run out in the stores and clients are forced to purchase products from other companies (Jaya 2007). The problem has also made it difficult for ATW to communicate appropriately with the small and mid-sized vendors.
The fact that these small and mid-sized vendors also stock products from other firms also poses another challenge. It is possible for ATW to help the mid-sized vendors implement VMI, but the fact that they also sell products of competitors means that it is not only ATW that will benefit from the investment but also its competitors. This is one of the biggest issues that have made it difficult for the ATW to help these small and mid-size vendors to implement this new technology.
The small size of these vendors has also made it unnecessary for them to embrace this new technology. They shy away from the heavy initial costs of implementing this technology because of their financial constrains (Wang 2014). It means that it may take awhile for these small and mid-sized vendors to embrace this new approach of conducting trade. It explains why the firm has primarily focused on the large established vendors which have established their systems and can easily relay relevant information to ATW about replenishing the stock in their shelves. This means that it is losing the sales revenue that would have been made if these small-scale traders had effective systems of communication (Franke 2010).
It is clear from the case study that ATW is making impressive sales from the large vendors which have embraced VMI technology in their operations. However, their sales through the small and mid-sized vendors are not satisfactory. This firm can make an effort to help it increase its sales at these small and mid-sized distributors while keeping inventory low. The following are some of the strategies it can use to achieve this.
The first strategy will be to invest more on promotional campaigns. According to Li (2007), most of these small and mid-sized distributors are always keen on stocking products which have high demands in the market. They heavily rely on high stock turnover in order to sustain their operations. As such, ATW should try and push up the demand for their products by creating awareness of their brand. Once the products become popular, these vendors will have no option but to stock more of ATW’s products. The promotional campaigns will also make these small and mid-sized distributors have a better knowledge of this brand. They will develop interest in stocking the product because they know it will not be difficult to explain to the customers the benefits associated with this brand (Shah 2009).
Another strategy that this firm can use is to take advantage of these vendors’ inability to embrace VMI technology and edge out other competitors in this market. As mentioned in the case study, all the vendors which have embraced the VMI technology can easily communicate with their suppliers about the stock in their shelves. All other suppliers will, therefore, know when it is the right time to supply more products. This is not the case among the small and mid-sized distributors. This firm can form a close partnership with them and promise them more incentives so that they inform ATW about changes in stock (Sople 2012). They can make direct calls to the sales department so that new products can be delivered to replenish the stock.
Another strategy may be to have agents who regularly visit these small and mid-sized vendors to know how the products are fairing on in the shelves of the distributors. These agents will inform the sales department of ATW about the size of the stock and when it is necessary to supply more products. If possible, this firm can negotiate for spaces in the shelves of the mid-sized distributors and have its sales representatives at these shelves.
These sales representatives can engage customers who want to purchase any of the products offered by this Company at that particular store (Mba 2012). The representative can help the client by explaining how the tools work, reasons why it is superior to other similar products manufactured by other companies, and any other relevant information that a client may need when planning to make a purchase of the products offered by ATW at these stores.
According to Tan (2003), it is important to understand opportunities and challenges in managing and maintaining effective relationship with both large and small-scale customers in the supply chain. One of the biggest opportunities in managing and maintaining relationship with the customers is the emergence of different modes of communication. A firm can communicate with its clients in social media platforms such as Facebook, Tweeter, YouTube, among other platforms (Waters 2003). Through these platforms, any misunderstanding can easily be addressed and a good relationship maintained.
Another opportunity is the improved mode of travel that is now available in the modern society. Cadogan (2009) says that the world has become a global village as the geographical barrier that existed before has been eliminated. A firm can easily visit its major customers, especially the organizational customers, and address issues that may affect the relationship. This helps in managing and maintaining effective relationship (Rai 2013). The desire of the customers to have a regular and reliable supplier also makes it easy for a firm to maintain good relationship with them. These customers always appreciate such effective relationships because they know they stand to benefit from them (Barnes 2000).
It is important to note that there are some challenges that exist when it comes to managing and maintaining these relationships. One of the biggest challenges is market competition. ATW has a number of competitors which target the same clients. When customers have a number of choices to make when planning to purchase a given item, they often feel that they do not need to form a close relationship with an individual supplier.
This may make them committed to such supplier even in cases where other suppliers offer better deal. Communication must be mutually appreciated and maintained by both parties involved. When one party is not interested in such communications, it becomes almost impossible to manage and maintain effective relationship. Poor communication systems among the small players also affect effective relationship between this firm and its clients (Jha 2008).
When the supplier and its clients cannot communicate regularly, then the relationship can get strained (Kumar & Reinartz 2012). High number of the small and mid-sized customers may also make it challenging to maintain a close relationship with them, especially in cases where some may demand for specialized attention from the supplier (Dahmen 2004).
List of References
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