Vendor Managed Inventory          (VMI)VMI is essentially an integratedapproach whereby the inventory   at the distributor...
VMI rationale ….    By pushing the decision making  responsibility further up the supplychain, the manufacturer/vendor wil...
VMI includes …• Determining appropriate order  quantities• Managing proper product mixes• Configuring appropriate safety s...
Typical Benefits to          Manufacturers• Lower inventory investments (raw  and finished)• Better scheduling and plannin...
Typical Benefits to Retailers• Fewer stock-out with higher  inventory turnover• Better market information• More optimal pr...
VMI Success Factors• Top management commitment• Focus on effort• Trust and partnership between  supply chain stakeholders•...
Electronic Data Interchange EDI  computer to computer  exchange of businesstransaction in a standard         format
EDI Benefits …• Quick access to information• Reduced labor and material costs  associated with handling paper-based  busin...
Ownership of inventory• Initially, ownership transferred to retailer  upon receipt of goods• Now, VMI is based on consignm...
Requirements for Effective    SP(Strategic Partnering)• Advanced information systems• Top management commitment  – Informa...
Important SP Issues• Inventory ownership:  – Retailer owns inventory  – Supplier owns the goods until they are    sold (co...
Important SP Issues• Confidentiality• Communication and cooperation  – When First Brands started partnering    with Kmart,...
Steps in SP Implementation• Contractual negotiations  –   Ownership  –   Credit terms  –   Ordering decisions  –   Perform...
Examples of SP Successes       and Failures• Western Publishing-Golden Books:  – Western Publishing is using VMI for its G...
Upcoming SlideShare
Loading in …5
×

Vendor managed inventory

6,283
-1

Published on

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
6,283
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
323
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • Wal-Mart do not own most of the merchandise in their retail stores. They own them briefly as they move through the check-out counter.
  • Vendor managed inventory

    1. 1. Vendor Managed Inventory (VMI)VMI is essentially an integratedapproach whereby the inventory at the distributor/retailer(downstream) is monitored and managed by the manufacturer (upstream)
    2. 2. VMI rationale …. By pushing the decision making responsibility further up the supplychain, the manufacturer/vendor will be in a better position to support the objectives of the entire integrated supply chain resulting in sustainable competitive advantage
    3. 3. VMI includes …• Determining appropriate order quantities• Managing proper product mixes• Configuring appropriate safety stock
    4. 4. Typical Benefits to Manufacturers• Lower inventory investments (raw and finished)• Better scheduling and planning• Better market information• Closer customer ties and preferred status
    5. 5. Typical Benefits to Retailers• Fewer stock-out with higher inventory turnover• Better market information• More optimal product mix• Less inventory in channels (transfer costs)• Lower administrative replenishment costs
    6. 6. VMI Success Factors• Top management commitment• Focus on effort• Trust and partnership between supply chain stakeholders• Highly effective computer/information systems (EDI, Bar coding, Scanning)• Competent manufacturers and the ability to forecast• Willing stakeholders partners and patience
    7. 7. Electronic Data Interchange EDI computer to computer exchange of businesstransaction in a standard format
    8. 8. EDI Benefits …• Quick access to information• Reduced labor and material costs associated with handling paper-based business transaction• Better communication• Increases productivity• Improved tracing and expediting• Improved billing• Better customer service
    9. 9. Ownership of inventory• Initially, ownership transferred to retailer upon receipt of goods• Now, VMI is based on consignment relationship in which manufacturer owns goods until sold.• Retailer benefit: lower inventory cost• Manufacturers benefits: better control• Supply chain benefit: system-wide cost reduction
    10. 10. Requirements for Effective SP(Strategic Partnering)• Advanced information systems• Top management commitment – Information must be shared – Power and responsibility within an organization might change (for example, contact with customers switches from sales and marketing to logistics)• Mutual trust – Information sharing – Management of the entire supply chain – Initial loss of revenues
    11. 11. Important SP Issues• Inventory ownership: – Retailer owns inventory – Supplier owns the goods until they are sold (consignment) • Why would a firm do this?• Performance measures: Fill rate, inventory level, inventory turns
    12. 12. Important SP Issues• Confidentiality• Communication and cooperation – When First Brands started partnering with Kmart, Kmart often claimed that its supplier was not living up to its agreement to keep two weeks of inventory at all times. It turned out that this was due to the fact that the two companies employed different forecasting methods.
    13. 13. Steps in SP Implementation• Contractual negotiations – Ownership – Credit terms – Ordering decisions – Performance measures• Develop or integrate information systems• Develop effective forecasting techniques• Develop a tactical decision support tool to assist in coordinating inventory management and transportation policies
    14. 14. Examples of SP Successes and Failures• Western Publishing-Golden Books: – Western Publishing is using VMI for its Golden Books line of children’s books at several retailers. – POS data automatically triggers re-orders when inventory falls below a reorder point. – This inventory is delivered either to a distribution center, or in many cases, directly to the store. – Ownership of the books shifts to the retailer once deliveries have been made.
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×