Administered VMS, or Administered Vertical Marketing System, refers to a cooperative arrangement where independent entities within a supply chain coordinate their efforts under the leadership or administration of a dominant member. In this system, the dominant member, typically a manufacturer or retailer with significant market power, exerts influence to align the activities of other entities towards common goals without owning them outright.
Table of Contents
Characteristics of Administered VMS
1. Leadership and Coordination:
- Administered VMS involves a dominant member (e.g., manufacturer, retailer) assuming leadership to coordinate activities across different levels of the supply chain.
- They exert influence to align marketing, distribution, and sales strategies towards mutual benefit and efficiency.
2. Mutual Goals:
- Participants in an administered VMS share common objectives such as increasing market share, improving product visibility, or reducing distribution costs.
- They collaborate under the leadership to achieve these goals through joint planning, resource sharing, and coordinated efforts.
3. Resource Sharing:
- Entities in an administered VMS may share resources like distribution networks, marketing campaigns, or technological platforms.
- This enhances operational efficiency and effectiveness, leveraging combined strengths to compete more effectively in the market.
4. Non-Ownership Relationship:
- Unlike other vertical marketing systems like corporate VMS where one member owns another, administered VMS participants retain their independence.
- They collaborate voluntarily under the leadership’s guidance without full integration or ownership control.
Example of Administered VMS
Real-Life Scenario:
Imagine a global electronics manufacturer with a dominant market position and extensive distribution channels:
- Leadership Role: The manufacturer takes the lead in coordinating marketing campaigns, setting pricing strategies, and managing product promotions across various retail chains and online platforms.
- Mutual Goals: Retail partners and online distributors collaborate with the manufacturer to expand market reach, enhance brand visibility, and increase sales volumes through joint advertising and promotional activities.
- Resource Sharing: The manufacturer shares market intelligence, product training, and logistical support with retail partners to streamline inventory management, improve customer service, and optimize supply chain efficiency.
- Non-Ownership Relationship: Despite the manufacturer’s leadership role, retail partners maintain their independence and brand identities while benefiting from the manufacturer’s market insights and operational expertise.
References and Industry Use
Administered VMS concepts are often referenced in marketing and supply chain management literature. They illustrate how cooperation and coordination among supply chain members can lead to competitive advantages without the need for full ownership or integration.
Conclusion
In conclusion, administered VMS represents a collaborative approach in vertical marketing systems where a dominant member coordinates independent entities towards shared goals. It emphasizes leadership, mutual cooperation, and resource sharing to enhance market efficiency and competitive positioning. Understanding administered VMS is essential for stakeholders in marketing, distribution, and supply chain management to leverage collaborative strategies for sustainable growth and market success.
