Do you have a warehouse at near capacity while your production line faces component shortages because you don't know where to look, and you're actually not sure how much stock you do have anyway? If so then your company is not alone.
Over 82% of organisations believe their supply chains need to change significantly to meet current challenges and prevent inventory chaos (Capgemini Research Institute). Continued supply and delivery problems can lead to that all-too-familiar scramble to avoid a line-down situation, and the descent into near constant fire-fighting to make sure assembly keeps running.
As your operation grows, the complexity of managing your component needs increases exponentially. A once straightforward inventory process is transformed into a complex puzzle with some serious P&L implications. An OEM's procurement team will at some point have to grab the horns of the perennial logistics servicing dilemma: Is it time to reconfigure logistics around Vendor Managed Inventory (VMI), a Third-Party Logistics (3PL) partner, or should you implement a hybrid solution that leverages the strengths of both?
At Acorn we want to help you identify which solution fits your current challenges. We tailor bespoke solutions rather than trying to squeeze off-the-shelf services into being the solution to your production requirements. We want you to get clarity on what each service actually delivers for your production throughput, working capital efficiency, and operational headspace.
Acronym Confusion: VMI, 3PL and your OEM
VMI and 3PL are often mentioned in the same breath, yet they solve substantively different issues within your supply chain function. We're experts in both, and know it is crucial to understand the difference between them before committing and adapting your logistics infrastructure with either system.
Problem:
Many OEMs know about VMI and 3PL, and that they should be useful for manufacturing logistics, without understanding the operational separation between inventory management logic and physical logistics execution.
Solution:
Recognising that these simple TLAs (three-letter acronyms) are actually complex services which address distinct and complex pain points. VMI is focussed on inventory planning, management and replenishment, while 3PL handles physical material flow and optimisation of delivery by integrating aspects such as transportation, warehousing, inventory management, order fulfillment, kitting, and shipping.
These services can work independently or in concert with each other depending on your company's particular challenges. 62% expanded their use of outsourced logistics services last year (Navigating Change: Insights Into Evolving Dynamics in Supply Chain, 2025), so understanding the distinctions between 3PL and VMI before making significant operational changes is crucial.
Making VMI Simple, Really?
VMI involves your supplier and/or logistics partner monitoring your inventory levels and replenishing based on usage, so you don't have to. The administrative and logistical load of inventory management is transferred to experts, and a solutions partner who can optimise it with knowledge and systems that most internal organisational capacity cannot match.
With VMI, your business can:
— Remove last minute BOMs and emergency purchase orders that stop production workflow and cause emergency delivery costs.
— Improve uptime with up to 35% fewer stock-outs due to proactive component management (Deloitte).
— Achieve a 25% reduction in inventory holding costs through the implementation of optimal buffer stock levels (Institute for Supply Management).
— Have less administrative workload as purchase orders are automated with EDI integration and/or setup of vendor portals.
— Enhance demand visibility with more accurate forecasting across your supplier network.
VMI is a service that works best with high-volume, predictable components, and for companies neck-deep in Excel order forms. Use it to transform reactive procurement into proactive inventory management through improved monitoring and replenishment systems.
Our solution approach normally involves integrating your ERP system with our warehouse management system to enable inventory visibility, and to set initial stock levels that are then regularly updated according to a variety of factors that impact manufacturing resilience, agility and efficiency. We integrate demand planning and forecasting to stay one step ahead of changes in production, assembly scheduling, or delivery issues.
Is it time for VMI?
If your procurement team spent last month buried in manual ordering, your MRP system generates more noise than clear insight, or you've experienced a line stoppage in the last quarter, then you're ready for VMI.
Getting Clear On What 3PL Actually Does
A 3PL provider physically handles your inventory, storing it close to your factory, preparing kits, and delivering parts just-in-time. A 3PL partner is the execution muscle and coordinating movement, not the planning logic, in your supply chain. Think of them as your physical logistics infrastructure outsourced, to provide for greater efficiency, flexibility and scaling.
Your 3PL partner offers:
— Warehouse space and management when yours is at capacity, operating with specialised WMS (Warehouse Management Systems) that you may lack internally.
— Professional logistics handling by specialists (not your production team) who have deep operational systems and experience with FIFO, batch control, kitting optimisation and QA testing in optimal environments.
— Just-in-time delivery coordination across multiple suppliers, synchronised with your production schedule.
— Advanced material handling systems that maximises space utilisation, minimises parts obsolescence and, indirectly, improves cycle counts.
— Reduced transportation costs through consolidation and delivery optimisation methodologies.
— Cross-docking capabilities that minimise handling and maximise throughput.
Problem:
Your valuable production floor space is being consumed by inventory (costing multiples more per square foot than renting external specialist warehousing space), and your trained workforce are hunting the factory for parts and tools, performing logistics tasks they weren't hired or trained for, diverting focus from value-added production activities.
Solution:
3PL services free up warehouse space and significantly reduce overall logistics costs for 80% of users, with 89% reporting it improves their service levels (Third Party Logistics Study, NTT Data 2024). The operational burden shifts from your team to logistics specialists who can implement lean manufacturing principles to material flow.
Your company is ready for 3PL when deliveries arrive out of sync with your receiving capacity, your warehouse is overflowing with slow-moving SKUs adjacent to high frequency items, and your receiving function has become a daily troubleshooting headache rather than an seamless systematic materials flow operation.
Modern 3PLs have evolved far beyond simple warehousing. Today a 3PL provider should offer sophisticated fulfillment systems with real-time visibility, sequenced delivery protocols, and KPI dashboards that integrate with your production metrics.
At Acorn we provide a full suite of 3PL value-added services like kitting, sub-assembly, and quality inspection which effectively extend your production floor capabilities beyond your on-site facilities. We have a high historic on-time delivery (OTD) performance of >95%, with a near-zero failure rate of <0.01%.
VMI vs 3PL: At-A-Glance Comparison
The decision framework hinges on understanding your primary pain point. If it's inventory management logic (knowing when to order what), VMI addresses this directly. If it is physical logistics execution (where to put things and how to move them efficiently), 3PL provides the solution. For many growing OEMs, however, the answer increasingly becomes "both".
Making a service decision
An Integrated Approach For When You Need Both
Most growing OEMs eventually reach a point where one service alone can't fix everything. In fact, 87% of 3PLs report increased demand for integrated solutions that combine planning and execution (NTT Data, 2025). This convergence creates what might be called a 'Logistics Stack', a seamless integration of inventory intelligence and physical logistics capability.
Layered Solution Architecture:
— VMI forms the management and planning layer, optimising your replenishment, managing order exceptions, and maintaining ideal stock levels.
— 3PL constitutes the wrap-around execution layer—providing storage capacity, handling expertise, and synchronised delivery protocols, along with added services.
— Integration points ensure seamless data flow between inventory metrics, availability, usage and physical material movement.
— Consolidated KPI dashboards give you end-to-end visibility to eliminate partial fragmented views of stock levels, completed kitting and sub-assembly work.
Common Integrated Scenarios:
— You are managing multiple suppliers with different delivery schedules and need combined visibility.
— The complexity of your Bill of Materials (BOM) has increased beyond your internal systems' ability to handle.
— You've outgrown your warehouse space but still need granular inventory visibility.
— Operationally, you need to shift into managing strategic supplier relationships, rather than daily production line logistics.
— Your production scheduling requires just-in-time delivery coordination that's beyond in-house management capability.
This integrated approach is most useful for OEMs with high-mix, low-volume production (HLMV) environments in which classic kanban systems are not up to the task of dealing with the variability in production customisation. HMLV manufacturing is most specifically useful to automative, aerospace, medical and electronics industries where specialised components and customisation needs are constantly growing.
In this combined approach, the VMI 'module' provides the automated consumption (pull requests) and replenishment, while the 3PL 'module' delivers dynamic scheduling and physical execution flexibility.
Phased Implementation
Every operation is unique with production timelines and physical scheduling factors that impact implementation. At Acorn we pride ourselves on tailoring to specific needs, and we've four decades of experience in doing so. Here's a suggested phased implementation moving from plan to execution.
VMI implementation:
— System assessment and integration planning
— Data migration and parameter setting
— Parallel running and exceptions handling
— Optimisation and fine-tuning
3PL transition:
— Space planning and layout design
— Physical setup and system configuration
— Inventory migration (typically phased by component type)
— Process optimisation and stabilisation of KPIs
Integration of both systems:
— System communication (EDI, API, other electronic integrations)
— Exception handling protocols
— Consolidated reporting development
Which Is The Right Logistics Service For Your Operations?
You don't have to transform everything at once. The strategic approach is to identify your most acute pain point — whether that's overwhelm in administration, warehouse overflow, or logistics delivery chaos — and address it first with the appropriate solution.
VMI provides the data intelligence to optimise your inventory levels and automate replenishment. 3PL delivers the physical infrastructure to store and move your componentry efficiently. Together, these services create a comprehensive Logistics Stack that scales with your OEM operation while mitigating increases in administration.
Remember, 95% of those using 3PL provider services see overall success with 3PL, and 91% cite significant reductions in logistics costs specifically (Third Party Logistics Study, NTT Data, 2024). Your path can be equally successful when you match the right solution to your unique goals.
If you're not sure where to begin, our delivery team will help you find the simplest first step toward inventory clarity and zero line-downs. We'll analyse your current pain points and recommend a targeted solution tailored just for you — whether that's VMI, 3PL, or a custom-designed combination that delivers the uptime and resilience your production demands.
Sources — Insights Into Evolving Dynamics in Supply Chain, NTT Data, 2024, 2025 — Intelligent Industry, Capgemini Research Institute
Further Reading — Thinking of implementing VMI in your supply chain? Here are the top questions — Fight excess inventory: causes and consequences of overstocking
Learn about our key services
At Acorn we tailor our services to laser focus in on what UK OEMs need. To provide you with a more resilient supply chain and better logistics solutions.
We offer bespoke supply chain solutions that boost your back-end logistics and inventory infrastructure with open and transparent tracking and results.
