November 2006 Big Grower

Around The Table

Vendor managed inventory (VMI) systems allow growers to have more control of their destinies on the sales floor of pay by scan stores. The vendor is responsible for how much product is in the garden center and how it looks. VMI programs help ensure the overall accuracy and efficiency of pay by scan.

The programs allow for automated re-ordering of product because vendors receive regular (daily or weekly) updates of what has been sold and what the retailer needs. When inventory levels reach a pre-determined level, that vendor is automatically notified and can prepare the next shipment. The store is not required to carry as much inventory, and the grower can be sure that the freshest product is available for sale. See what some growers had to say about their experiences with VMI.

How did VMI work for you in 2006?

"We implemented the first phase of VMI with certain customers in 2005; however, 2006 was the first year with a full-scale roll out. We have been using a VMI system for many years as a non-POS vehicle. The conversion to a POS model has been exactly as we expected: challenging and capable of successfully being executed."

Ñ Jerry Halamuda, president, Color Spot, Fallbrook, Calif.

"VMI is here to stay. We know how the system works but still have a long way to go as far as tracking our inventories at the store level."

Ñ Victor Vasquez, general manager, Timberline Nursery Inc., Hillister, Texas

"I would say that VMI was OK in 2006. It was the second full spring season in which we operated under VMI, and any time you gain more experience with a program, it is positive."

Ñ Dean Chaloupka, president, Floral Plant Growers, Denmark, Wis.

What lessons did you learn in the past year? What will you do differently next year?

"Clearly, the main drivers to any business are the same; however, the risk factor has made us more focused on inventory management, production flow, quality standards, etc. In 2007, we will continue to engage our inventory, sell-through and servicing metrics to a stronger degree."

Ñ Jerry Halamuda

"In regards to lessons learned, we need to take charge of our own product at the store level. We plan to send smaller shipments more often in order to keep fresher products at the stores."

Ñ Victor Vasquez

"Lesson one is to trust consumers and their buying patterns. Outside of sales spikes or decreases due to weather, the sales data we have shows very clear, repetitive (year over year) and predictable patterns and habits based on day of the week and week-to-week. Lesson two is that customers are starving for information and attention. Engage the customer in the garden center with merchandising, and they will buy more. Ignore them, and they will buy less or go elsewhere."

Ñ Dean Chaloupka

How has your VMI program affected your production numbers? What kinds of changes did you make?

"Our numbers for 2007 will be up significantly due to customer demand. Our production numbers are generated from our marketing plans. Our marketing plans are generated from our partnership agreements with our customers. VMI in terms of units produced, units shipped, units scanned, etc., are all modeled from experience and prior period results."

Ñ Jerry Halamuda

"VMI has affected our production numbers differently, depending on the product and region where it ç is shipped. Timberline Nursery, Inc., is more focused on having the right product at the right time."

Ñ Victor Vasquez

"Our production numbers and, more importantly, timing are now directly correlated to the purchasing patterns, which we have documented."

Ñ Dean Chaloupka

How has VMI affected your product mix? How will it impact your plans for next year?

"VMI has allowed us greater flexibility in modifying our numbers to key on specific higher velocity container sizes and varieties."

Ñ Jerry Halamuda

"VMI has enabled us to better track our product mix in the stores; therefore, we can send products we know the customer will buy. VMI will have a great impact on the particular sizes that we grow during specific seasons."

Ñ Victor Vasquez

How is your off-peak season different now that you have implemented VMI versus your pre-VMI days?

"Of course, when retail inventories have slower turnover, we are focused on diminishing inventory presence to match our customers' footsteps."

Ñ Jerry Halamuda

"We now have a better understanding of what product sells best during the off-peak season. It helps us to minimize waste resulting from excess product."

Ñ Victor Vasquez

"Much more of our planning is self-generated. By this I mean in pre-VMI days we reacted to what we were told the plan would be by merchants. Now we review all scan data by store, by market and by region for last year and the previous year and from it propose a program, propose the timing of advertisements to the merchants and develop our production plan accordingly. The off-peak is spent much more engrossed in studying the sales to the end consumer than ever before."

Ñ Dean Chaloupka