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Stage Five: Making the grand partnership actually work.

ABC pitched 3 different MDs on the partnership plan, selecting one to potentially make this VMI and virtual-
selling scenario happen. Lots of questions and concerns were raised by both parties, but the answers were
already in existence in other channels that have followed in Wal-Mart’s footsteps. Implementation of this
grand plan is now under way (12/06), and scenarios for opening up a totally new type of location that
would be designed around receiving 10K items in the middle of every workday night are being planned.

CONCLUSIONS

Twenty years ago Wal-Mart first proved to the world that by buying straight truckloads into master
distribution centers on a VMI basis, they could get the following benefits at its stores.
■ Cut inventory in the stores in half.
■ Improve true fill-rates by over 10%.
■ Double the number of items offered in the same size store.
■ Attract more customers from even further away due to more items with higher fill-rates and of
course, every day low prices. And,
■ See average purchases per customer visit climb 78%.

Now, with third party VMI implementation firms, web service networks between channel partners, and web
order entry systems that can be private labeled for any number of distributor/dealers, these benefits can be
achieved between MDs and distributors. And, this new platform offers great new benefits to manufacturers,
but that is another story. For more on: this story; fill-rate economics; VMI; virtual selling of MD items through
small footprint stores with next, early AM delivery; and “the next story” about manufacturers benefits, hit
the “discussions” button at www.merrifield.com to enter a “collaborative space” adventure with blogs and
wiki content provided by distribution channel experts.

© Merrifield Consulting Group, Inc.
Article 1.15
December, 2006
D. Bruce Merrifield, Jr.
www.merrifield.com

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