Component suppliers say VMI agreements with customers have been growing over the past year, primarily because of oversupply in the market and excess inventory. One passive-component maker noted that in the past few years, the number of VMI programs it manages has jumped from three to 27. Many suppliers are working with distributors to create VMI programs on a global basis, which is no easy task.

Suppliers hope VMI programs avert inventory buildup, particularly at EMS companies, and they're asking distributors for VMI services to help contract manufacturers better manage OEM inventory.

Increasingly, EMS companies are finding that component suppliers can't provide the inventory and logistics support they need as they expand their operations globally. That's where distributors come in. For years, EMS providers have been taking advantage of distributors' supply chain services such as auto-replenishment, consignment and bonded-inventory programs, and in-plant stores. They applaud any inventory program that will benefit their balance sheets by keeping inventory at a distributor location rather than a customer site.

By offering VMI services, distributors, at least the giants in the industry, can leverage all of their global IT and supply chain service investments. For instance, Avnet Electronics Marketing's expanded VMI service offering for component suppliers, available through its new Supply Chain Services business unit, can consolidate a supplier's customer orders into a single global pipeline and automatically deliver price and lead time information. Distributors typically manage the inventory at proximity or on-site manufacturing locations; the liability remains with the distributor until the OEM or EMS customer takes possession of the inventory. Avnet's expanded VMI offerings include services such as component-supplier management, VMI management and logistics support, forecast management, supplier aggregation, and outsource warehousing and logistics.