The Supply-Chain Problem-Solvers

It’s quite a boast to suggest someone is changing the face of the supply chain. But that’s exactly what the integrated supply company Vendor Managed Solutions (VMS) is doing from its headquarters in Troy, Michigan. With its e-commerce portal, VMS365, VMS is making purchasing operations, materials management, logistics, and inventory programs as easy as clicking a button.

Imagine you are a factory manager at Chrysler and you need a part for the facility. You log on to VMS365, select the item you need, and it automatically ships to you—no paperwork required.

A privately held company, VMS manages the supply and demand of more than one million factory parts for Chrysler and other large and midsize clients in the United States, Canada, and Mexico, processing more than 450,000 transactions annually.

After spinning off from Electronic Data Systems (EDS) 14 years ago, the new company, SDE, provided contract staff to General Motors and began selling basic IT commodities. Over the next two years, other automotive companies were asking if SDE had relationships with suppliers outside of IT. “As requests would come in, we would go out and try to establish those relationships,” says Rumia Ambrose-Burbank, who was part of the original EDS transition team.

It took only 18 months for the company to realize untapped opportunities in the maintenance, repair, and operations (MRO) supply side, including the purchasing of all products that did not go into the client’s finished product. Two years later, the operations business was doing so well it was spun off into a separate company, VMS, and Ambrose-Burbank was named president. VMS continued to work with Chrysler, for which it sourced all indirect material for 26 plants across North America, resulting in a 40 percent savings off the company’s multimillion-dollar material purchases over the life of what was then a three-year contract. But VMS soon realized it was in a commodity business. To offer higher value, the company acquired an MRO consulting practice from AT Kearney.

“[Today], our role is to look at the entire supply chain—from buying to warehousing to standardizing—to reduce MRO costs,” Ambrose-Burbank says. “We will analyze all MRO supplies across every division and location of a company and can come back to the purchasing manager and say, ‘You are using 10 different types of widgets, but they all meet the same requirements. If you standardize on a single widget, you can save 10 percent in overall cost.’”

In addition, one facility in need of a part can look across all other facilities to see if that part is sitting on a shelf somewhere not being used before spending money on another one. If the facility doesn’t find what it needs, it can requisition VMS, which will scan its entire customer base. Rather than a cut of the sale, VMS gets a cut of the savings, which it guarantees from both price and head-count reductions. Unrealized goals result in penalties. VMS’s legal partner, Kirk, Huth & Lange, PLC, reviews all contracts and makes strategic recommendations.

The system is customizable and includes checks and balances to control costs, ensure items are billed to the right cost center, and that the person ordering has the proper permission levels. Robust reports allow clients to drill down on their spending data by region, facility, country, or individual item. VMS reviews this data with clients quarterly and provides suggestions for efficiency improvements.

In 2011, VMS secured additional business from ExxonMobil and Hitchiner Manufacturing and currently has clients in automotive, pharmaceutical, aviation, petrochemicals, and energy. The new business resulted in a 20 percent revenue growth, increasing the firm’s buying power to $675 million. And as the supply-management system pervades new markets and firms, its sure to gain even more customers, a cycle of growth and expansion VMS looks forward to. ABQ