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VMI

Vendor Managed Inventory (VMI) is a business model where vendors manage inventory levels at the buyer's location based on sales data and demand forecasting. This system enhances supply chain visibility, reduces inventory levels, and lowers costs for both buyers and suppliers. However, it requires trust and data sharing, which can be a concern for supply chain professionals.

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4 views

VMI

Vendor Managed Inventory (VMI) is a business model where vendors manage inventory levels at the buyer's location based on sales data and demand forecasting. This system enhances supply chain visibility, reduces inventory levels, and lowers costs for both buyers and suppliers. However, it requires trust and data sharing, which can be a concern for supply chain professionals.

Uploaded by

dipjeet2238
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Vendor Managed Inventory (VMI)

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• Vendor Managed Inventory (VMI) is a
business model where the buyer of a
product provides information to a vendor
of that product and the vendor takes full
responsibility for maintaining an agreed
inventory of the material, usually at the
buyer's consumption location.

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• A third party logistics provider can also be
involved to make sure that the buyer have
the required level of inventory by adjusting
the demand and supply gaps.
• VMI makes it less likely that a business
will unintentionally become out of stock of
a good and reduces inventory in the
supply chain.

3
Vendor Managed Inventory
 It is a Web-based Supply Chain
Management system used by Customer,
your 3pl and Suppliers.
 A Warehouse Management System is used
to manage the Logistics process by the 3pl.
 The WMS can be integrated with the VMI
system to provide a total solution for
Customer’s VMI business model.

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How a vendor managed inventory system works

• Both the vendor and buyer agree on what goals


and metrics define success for their VMI
relationship. These are usually in-stock
performance, inventory turnover rate, and
transaction cost.
• Other parts of the agreement will address
whether or not the buyer pays for the inventory
on acquisition or on sale to the end user. Along
with how excess inventory will be returned.
• The vendor ships inventory to the buyer or
retailer.
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• The vendor monitors the sales patterns
and inventory levels of their products at
that buyer or retailer.
• The vendor makes reordering and
replenishment calculations based on
demand forecasting and lead time.
• Specialist or planner reviews the
calculations and places the replenishment
orders.

6
Benefits Vendor Managed Inventory
 Transfer Inventory, and responsibility to Suppliers.
 Visibility of the total supply chain.
 Improve working Capital up to 35%.
 Proven Inventory/Warehousing systems (Web based),
including;
– Visibility of stock holdings
– Visibility into supply chain (ASN)
– Quarantine (theoretical) stores
– No locally loaded software management
 Removal of safety stock
 Lower inventory levels
 Reduction in purchasing-related admin costs
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• The supplier/manufacturer can gain some
benefits from vendor managed inventory as
they can gain access to a customer's point of
sale (POS) data makes their forecasting
somewhat easier.
• Manufacturers can also work their
customers' promotional plans into
forecasting models, which means enough
stock will be available when their promotions
are running.
• VMI can also help you keep your costs down,
since the goal of VMI is to keep your
inventory levels lowered and provide your
resupply as needed.
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For manufacturers..

• Be generous with your data.


• Protect your data
• Become experts on your vendors
• Create a VMI contract that specifies in detail what
inventory the vendor will manage, minimum and
maximum inventory levels, and return policies
• Expect reputable small- and medium-size vendors to
be your best and most reliable VMI partners.
• Be up front about any other factors that may affect
buying behavior.
• Set minimum/maximum limits on how much
inventory you’re willing to hold or how much physical
space you’re willing to reserve for the inventory.
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For suppliers..
• Explore options with your buyers to get
more value than just storage
• Be proactive about seeing your buyer’s
demand forecasting, inventory levels, sales
numbers, and buyer behavior analytics.
• Get representatives on the ground in the
retail outlets that carry your products. Make
sure display, branding, and selling points for
their merchandise inventory are optimized
and emphasized.
10
Operational Flow
Forecast & recommendation Via Internet

E-KANBAN Delivery
Cycle 1:16:2

Overseas Suppliers

Customer Australia
VMI W/H Australia

O/Seas

E-KANBAN Delivery
Cycle 1:16:2
VMI W/H Thailand

Forecast & recommendation Via Internet


Customer Thailand
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VMI Business Flow
Customer VMI Warehouse 3pl overseas Supplier

Forecast Usage Production


Recommendation
Arrange Pickup
Receive Goods Prepare Shipment
Arrange Shipment
Put Away Goods Create ASN
Ship Goods

ASN Receipt Deliver Goods Receive ASN


Confirmation Confirmation

Electronic Order
Pick Goods
KANBAN Cards
Deliver Goods

Receive Goods Electronic Delivery


Docket
Electronic Receipt
Confirmation Billing Report Issue Invoice

Make Payment

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System Modules
• Forecast Usage
• Recommendations
• ASN Management (ASN = Advance Shipping Notice)
• Billing Reports
• Aging Reports
• Inventory Status
• Inventory Movement
• Inventory Planning
• Item Master
• Supplier Information
• Email Alerts

13
Email Alerts / Notification
The system generates the following email alerts and
notification to Suppliers:

 Minimum / Maximum Stock Alert


Email is sent when stock falls below minimum or
maximum qty
 ASN Receipt Confirmation
Upon receipt of goods, email is sent to Supplier with the
Part No and Qt Received
 New Demand Alert
When there is a change in Forecast Usage /
Recommendation, email is sent to alert Suppliers to
adjust their Production
 New Billing Reports Notification
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Disadvantages of VMI
• Needing to allow a non-employee access
to your inventory data and sometimes your
actual physical inventory. A third party
keep the inventory levels where its needed
to be, and that perceived lack of control
can sometimes be unnerving to supply
chain professionals
• Supply chain managers will feel like they
can't find another source for a product that
is being managed by a supplier they trust
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