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Vendor Managed Inventory (VMI)
1. Vendor Managed Inventory (VMI) Leverage information to remove cost and time from the supply chain, while delivering better service to the end customer Anand Subramaniam
8. Customer / Manufacturer Partnership Quick Response (QR) Strategies Manufacturer receive POS data from retailers and use this information to synchronise their production and inventory activities with actual sales at the retailer. In this strategy, the retailer still prepares individual orders, but the POS data are used by the supplier to improve forecasting and scheduling and to reduce lead time Vendor Managed Inventory (VMI) Strategies Manufacturer decide on the appropriate inventory levels of each of the products (within previously agreed-upon bounds) and the appropriate inventory policies to maintain these levels Continuous Replenishment (CR) Strategies Manufacturer receive POS data and use these data to prepare shipments at previously agreed-upon intervals to maintain specific levels of inventory
13. VMI – Why & What VMI Manufacturer has access to the distributors inventory data and is responsible for generating purchase orders Collaborative supply chain initiative Manufacturer is responsible for maintaining the distributors inventory levels Optimising Supply Chain performance Collection & centralisation of inventory data Remote access to collected data Integration of inventory data & business systems
16. VMI – Before & After Before VMI M any manufacturers operated stocking programs where a representative visited a customer a few times a month and restocked their supplies to an agreed-upon level After VMI Instead of the customer monitoring its sales and inventory for the purpose of triggering replenishment orders, the manufacturer assumes responsibility for these activities
17. VMI – Business Model VMI Business Model The manufacturer generates the order, not the customer. VMI does not change the “ownership” of inventory. It remains as it did prior to VMI The manufacturer is responsible for creating and maintaining the inventory plan The manufacturer can view every item that the customer carriers as well as true point of sale data The manufacturer receives electronic data (usually EDI or via the internet) that tells him the customer’s sales and stock levels
24. VMI – Implementation Challenges Challenges Extensive testing of EDI Handling stock levels - over and / or obsolescence Learning curve User Acceptance Impact of random trade promotions / events Scope, KPI, role & responsibilities Technology capability Planner & buyer - trust relationships Contractual relationship