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    Vendor Managed Inventory

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    Pulkit Sinha
    Vendor managed inventory (VMI) is an inventory management system where the vendor takes responsibility for monitoring and replenishing inventory levels at the buyer's warehouse or stores. There are two types: wholesalers manage inventory for retailers, and manufacturers manage inventory for distributors. VMI can improve inventory costs and service levels for both retailers and vendors by streamlining the replenishment process and demand forecasting.

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    Vendor Managed Inventory

    Uploaded by

    Pulkit Sinha
    935 views12 pages
    Vendor managed inventory (VMI) is an inventory management system where the vendor takes responsibility for monitoring and replenishing inventory levels at the buyer's warehouse or stores. There are two types: wholesalers manage inventory for retailers, and manufacturers manage inventory for distributors. VMI can improve inventory costs and service levels for both retailers and vendors by streamlining the replenishment process and demand forecasting.

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    Vendor managed inventory (VMI) is an inventory management system where the vendor takes responsibility for monitoring and replenishing inventory levels at the buyer's warehouse or stores. There are two types: wholesalers manage inventory for retailers, and manufacturers manage inventory for distributors. VMI can improve inventory costs and service levels for both retailers and vendors by streamlining the replenishment process and demand forecasting.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    935 views12 pages

    Vendor Managed Inventory

    Uploaded by

    Pulkit Sinha
    Vendor managed inventory (VMI) is an inventory management system where the vendor takes responsibility for monitoring and replenishing inventory levels at the buyer's warehouse or stores. There are two types: wholesalers manage inventory for retailers, and manufacturers manage inventory for distributors. VMI can improve inventory costs and service levels for both retailers and vendors by streamlining the replenishment process and demand forecasting.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 12

    Vendor Managed Inventory

    VMI Concept
     It is a streamlined approach to inventory and order fulfillment where the
    supplier, instead of the retailer, is responsible for managing and
    replenishing inventory using EDI for electronic transfer of data over a
    network

     It is a supply chain optimizing practice where the inventory is monitored,


    planned and managed by the vendor on behalf of the consuming
    organization(retailer), based on expected demand and on previously
    agreed minimum & maximum inventory levels

     VMI can be distinguished in two forms:


     A wholesaler manages inventory levels for retailer. This is also known as Efficient Consumer
    Response(ECR). Retailer still owns the inventory, with replenishment done by wholesaler
     A manufacturer manages inventory levels for distributor. Distributor still owns the
    inventory, with replenishment done by manufacturer

    Vendor Managed Inventory 2


    Conventional Business Model
     Sales forecasted in replenishment system of retailer using historical sales

    data.
     Retailer tracks sales & inventory information and forecasts the orders

     Purchase Orders(PO) are created and communicated to the vendor using EDI

     Vendor assesses order fulfillment based on available inventory at his end

     If inventory available, vendor ships it to retailer’s warehouse/store and Adv.

    Shipment Notice (ASN), and EDI document communicated to retailer


     Vendor then sends invoice to retailer

     Retailer, on receiving the product, does invoice matching and payments are

    handled through their account payable system

    Forward Replenishment Model


    Vendor Managed Inventory 3
    Vendor Managed Inventory 4
    VMI Business Model
     Retailer sends sales & inventory information to vendor via EDI

     Vendor creates PO based on established inventory levels and fill rates

     Vendor sends ASN before shipping the product

     Upon receiving the acknowledgement to ASN, vendor sends the invoice to retailer and

    ships the product


     Retailer, on receiving the product, does invoice matching and payments are handled

    through their account payable systems

    Backward Replenishment Model


    Vendor Managed Inventory 5
    Vendor Managed Inventory 6
    VMI highlights
     VMI results in improving inventory costs & service levels, thus enhancing

    SCM
     Forecasting & replenishment is carried out by vendor

     VMI provides for smoother demand, increased sales, lower inventories and

    reduced costs of lost of sales


     VMI project is a BPR activity which uses Information Technology

     VMI helpful in overcoming Bullwhip effect

     VMI provides a competitive advantage to the retailer & vendor


     VMI should eventually evolve into CPFR

    Vendor Managed Inventory 7


    VMI benefits for Retailer
     Reduces inventory
     Reduced stock outs
     Reduced forecasting & purchasing activities
     Increase in sales
     Planning & ordering cost decreases as responsibility shifts to vendor
     Service level improves
     Purchasing transactions become fast
     Improved communication between retailer & vendor
     Eliminates paper work and improves data accuracy
     Focus can be increased of after sales service and other value added
    service for customers

    Vendor Managed Inventory 8


    VMI benefits for Vendor
     Improved visibility leads to better forecasting
     Reduces PO errors and potential returns
     Sales promotions can be easily incorporated in inventory plan
     Visibility in stock levels helps to identify priorities
     Opportunity to provide other value added services to customer

    Vendor Managed Inventory 9


    Challenges to VMI
     In providing priority service to VMI partners, some vendors reserve
    inventory which leads to shortages for other customers

     Insufficient level of system integration leads to incomplete visibility

     Lack of trust and skepticism from employees

     Limited level of collaboration

     High expectations from retailers

    Vendor Managed Inventory 10


    VMI Applications
     Multiple outlets, fast moving consumer goods
     Error sensitive industries like Pharmaceuticals
     Perishable goods
     Valuable & unpredictable component

    Vendor Managed Inventory 11


    Global & Indian Co. using VMI
     Wal-Mart(distributor) and Proctor & Gamble(vendor)
     Godrej(manufacturer) & Boyce(vendor)

    Vendor Managed Inventory 12

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