Optimizing inventory through supplier collaboration

The challenge

iHerb, an online health and wellness retailer serving consumers in over 180 countries, prides itself on exceptional customer service. The company offers two-day shipping across a diverse assortment of supplements, vitamins, minerals, sports performance, and bath and body products. Efficiently managing inventory and distribution processes for iHerb’s 50,000 high-turnover products is crucial to fulfilling its customer promise.

To meet its supply chain goals, iHerb aimed to:

• Collaborate effectively with 800+ diverse suppliers to manage lead times, fill rates and ship timeliness.
• Leverage real-time data for inventory management, demand forecasting and replenishment.
• Streamline receiving and distribution processes to ensure inventory is in stock and available for customer orders.
• However, the way iHerb previously worked with suppliers hindered their ability to achieve these goals.

“Before working with SPS, only 200 suppliers leveraged Electronic Data Interchange (EDI). Fulfilling orders using EDI versus manual methods is much faster and more accurate. Our suppliers’ order status communication via manual ‘cutsheets’ were only accurate half the time. Our planners spent hours adjusting inaccurate data for each item by keying in accurate data, instead of focusing on optimizing inventory and replenishment.”

-Michele Hernandez, VP of Inventory Management and Planning

The iHerb team recognizes that each supplier is unique. To optimize weeks of supply, the team must use creative approaches to ensure timely product delivery, considering each supplier’s specific needs and capabilities.

The solution

To address these challenges, iHerb embarked on a journey to improve supplier collaboration through information sharing by working with SPS, a partnership that has spanned over nine years.

Leading with industry best practices, SPS expanded EDI usage across the iHerb supplier network. SPS worked with suppliers to automate the exchange of accurate orders, order statuses, shipping notices and invoices. The improved collaboration delivered crucial insights for iHerb while ensuring strong supplier alignment.

Suppliers could adopt these practices to fit their business needs, fostering a mutually beneficial relationship. SPS also provided reporting tools to make it easier to track ongoing supplier performance, including lead time and on-time fill rates.

“SPS has been a valuable partner providing guidance and support, including insights into what other retailers are doing and what we should be doing. As we grow our supplier network to expand our assortment, SPS has been very flexible and supportive in helping us onboard suppliers faster. They have also played a crucial role in instilling best practices, including EDI, with new suppliers right from the start.”

– Celica Sanchez, Senior Manager of Supply Chain Development

The results

Through the SPS partnership, iHerb has improved speed to market, replenishment ordering, inventory management and supplier relationships.

With the help of SPS, iHerb has expanded EDI usage by 300+% in its supplier community. The expertise of the SPS team and the company’s established supplier relationships have been critical to this achievement.

“With improved supplier EDI adoption, we can stay on top of supplier on-time fill rates. We know what percentage of items we are getting and can feed that into our planning system, so we can quickly automate reorders. When a supplier rejects an order, we can quickly adapt by adjusting the order or reordering. Having complete and accurate data allows us to react so much faster to minimize out of stocks and maximize sales.”

-Michele Hernandez, VP of Inventory Management and Planning

By leveraging data from advance shipping notices (ASNs), iHerb expedites “lights-out transfers,” quickly moving products from suppliers to hubs and then fulfillment centers for customer orders. This automated receiving process is critical to fulfilling the company’s next-day or two-day shipping goal.

Thanks in part to the SPS partnership, iHerb continues to focus on new ways to better serve customers and operate more efficiently. Recognizing the importance of supplier collaboration, iHerb is focused on expanding forecast and sales data sharing to drive further supply chain automation.

“We are evaluating AI and other technologies to enhance efficiency and drive productivity. Complete and accurate data, including data we get from suppliers, puts us in a better position to empower our teams and serve our customers.”

-Michele Hernandez, VP of Inventory Management and Planning