Building Strategic Supply Chains and Vendor Managed Inventory

Colgate-Palmolive is a household name in CPG. For the first time ever, they reached $20 billion in net sales according to their 2024 Full Year Results. CP’s dominance in the CPG industry is due to a variety of reasons, including supply chain.

Luciano Sieber, Colgate’s Chief Supply Chain Officer, takes a proactive approach when it comes to CP’s supply chain. By embracing innovation, predictive modeling, AI, and using real-time data, Sieber has helped build one of the most resilient supply chains in CPG.

While most companies lack the deep pockets of Colgate-Palmolive, they don't need billions to start building an agile supply chain. Strategically investing in supply chain from day one will give any company a head start. The data backs this up. According to the Institute of Supply Chain Management, 55% of business managers believe that optimizing supply chain processes is the best way to gain a competitive edge.

Vendor Managed Inventory (VMI) is a strategic investment that companies can embrace from the start. VMI is supply chain approach that shifts inventory management responsibilities from retailers to suppliers, leveraging real-time data and automation to keep stores stocked with exactly what they need—no more, no less.

What Makes VMI So Powerful?

VMI removes the middleman, placing inventory control directly in the supplier’s hands. Instead of retailers placing purchase orders manually, suppliers track stock levels at each location, forecast demand, and ensure retailers always have the right products at the right time. When executed correctly, VMI can:

• Eliminate overstocking – Avoid tying up capital in excess inventory.
• Prevent stockouts – Keep shelves stocked, boosting sales and customer satisfaction.
• Reduce warehouse fees – Cut down on storage costs by improving inventory turnover.
• Strengthen supplier-retailer relationships – Foster collaboration through shared data and improved communication.

The Self-Service Revolution in Supply Chains

VMI is more than just a logistics strategy—it’s a self-service approach that leverages automation and real-time data to empower suppliers to make smarter inventory decisions. However, while many suppliers see the benefits of transitioning to VMI, they often struggle with where to begin.

Common Questions About VMI

Who Owns the Relationship in a VMI System?

This varies based on company size and structure. A common approach is that the individual responsible for writing purchase orders to retailers also manages the customer relationship. However, the actual forecasting and supply chain planning might be handled by a separate team behind the scenes. The key to a successful VMI relationship is clear agreements and defined expectations between retailers and suppliers.

What Are the Risks of VMI?

While VMI offers many advantages, it’s not without challenges. The most significant risks include:

• Dependence on Accurate Data – VMI relies heavily on real-time data sharing. Inaccurate or delayed data can lead to stock imbalances and lost sales.
• Trust and Transparency – Strong partnerships are essential. A lack of trust between suppliers and retailers can create friction and inefficiencies.
• Data Security Risks – Sharing inventory and sales data with third-party vendors introduces cybersecurity concerns. Given the rise of cyber threats, businesses must work with tech partners they trust to protect sensitive supply chain information.

Is VMI Right for You?

The companies that succeed with VMI invest in the right technology, partnerships, and communication frameworks. By leveraging automation and predictive analytics, they transform their supply chains from reactive to proactive—ensuring that they always meet customer demand efficiently.

If you’re considering VMI, start by defining clear expectations, securing trusted tech partners like Pantry, and prioritizing data accuracy. When done right, VMI doesn’t just optimize supply chains—it gives your business a competitive edge in today’s fast-paced market.