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Is Vendor-Managed Marketing the Next Iteration of VMI?

With the onset of vendor-managed inventory (VMI), the enterprise eliminated the bullwhip effect in the supply chain as first noted by Jay Forrester's Industrial Dynamics in 1961. By giving manufacturers visibility into point-of-sale data and the responsibility of creating and maintaining the inventory plans, they were able to reduce uncertainty, variability, and lead times. Ultimately, vendors were able to reduce costs and increase service levels.

Over time, the barriers to the implementation of a demand-driven supply chain model included an investment in information technology and the creation of more flexible corporate cultures that focus on customer centricity. Another prerequisite of the model was that all members of a supply chain recognize that they can gain more if they act as a whole group, which requires trust, collaboration, and the sharing of information.

Sound familiar to today’s always-on customer-centric marketplaces? Today’s marketplaces rotate around the customer with ever-increasing service levels and a laser focus, to create sustained differentiation in hypercompetitive environments. The vision to increase service levels while reducing the cost to serve in a collaborative data driven capacity to allow customers to buy what they what, when they want it, and where.

In today’s complex digital marketing environment opportunities present themselves to create responsive personalized data-driven dialogue based on demand side signals to reduce the cost to swerve and increase service levels. Today’s retailers have access to ever-evolving marketing technologies. These can be used to create an environment of information sharing focused on customer centricity, and one that if executed properly, is capable of building advocacy. 

For organizations that sell both direct and through distribution channels and partners, the value of first- party data is a clear and sustainable competitive differentiator. The ability to create addressable customer experiences at scale remains the coveted prize. Companies can now identify, qualify, and execute on addressability at scale to create sustainable competitive advantage. By leveraging the power of first-party data, retailers have the ability to work with manufacturers to create personalized campaigns for specific product offerings.

Performed properly, vendor-managed marketing shares the risk and reward between the enterprise and the customer, because it creates a differentiated position in the marketplace not solely available to either party, much like VMI. Amazon and the many manufacturers they work with them have certainly embraced this thought with the Amazon Dash buttons. Amazon Dash Button is a Wi-Fi connected device that re-orders your favorite product with the press of a button. Each Dash Button is paired with a product of your choice. When you're running low, simply press Dash Button and you will never run out of your essentials again. The convenient, low cost, easy to use button creates a frictionless commerce environment. It is only available to Amazon Prime members so you must sign up for the $99 membership to have the ability to take advantage of the Dash buttons. A great example of Amazon once again creating advocacy every step of the buyer decision journey.

Successful manufacturers have and will continue to embrace the demand-side signals to create responsive personalized content to drive conversion how, when, and where the customer desires.