Vendor Managed Inventory
Vendor Managed Inventory is a means of optimizing supply chain performance, in which the manufacturer is responsible for maintaining the distributors inventory levels. The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders. During this process, the supplier is guided by specified objectives regarding inventory levels, fill rates, and transaction costs.
A typical business model without VMI entails that when a distributor needs product, they place an order against a manufacturer. The distributor is in total control of the timing and size of the order being placed. The distributor maintains the inventory plan.
However, when utilizing the Vendor Managed Inventory model, the manufacturer receives electronic data, usually EDI(Electronic Data Interchange) or via the internet, that tells him the distributors sales and stock levels. The manufacturer can then view every item that the distributor carriers as well as true point of sale data. The manufacturer becomes responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order, not the distributor. Note that VMI does not change the "ownership" of inventory. It remains as it did prior to VMI.
VMI consists of two EDI transactions that are the basis of the process:
• Product Activity Record; the data contained in this document are sales and inventory information. This is the primary transaction
• The second transaction contains and deals with the product numbers and the quantities ordered by the supplier as the customer requests
In all of its forms VMI should be about improving visibility of demand and product flow in a supply chain, facilitating a more timely and accurate replenishment process between a supplier (vendor) and an inventory site (customer, distributor, distribution center, etc…). The application of VMI can be at any point within a supply chain:
Manufacturer – Wholesale Distributor
Wholesale Distributor - Retail
Manufacturer - End Customer
Wholesale Distributor – End Customer
Manufacturer – Internal Inventory Sites
Inventory is the proxy for information. In the absence of timely and accurate consumption data, each node in the supply chain compensates for the lack of information with inventory. Not only does poor information flow build supply chain inventories, but it also restricts each company’s ability to react to increases in demand, causes extended outages, service interruptions and lost sales. As actual demand for products is disseminated up the supply chain in a more real time environment, the more closely aligned production is with demand. As the gap between production and demand diminishes, so to does supply chain inventories and service level interruptions.
Supply chain management is connected with the flow of products and information between supply chain members and organizations. New development in technologies enables organization to get correct information easily in their premises. Technologies used are helpful in coordinating the activities which manage the supply chain. By this the cost of information is decreased because now we have increasing rate of technologies. In an integrated supply chain where product or raw material and information flow in a bi-directional we as managers needs to understand that information technology is more than just computers.
The founding fathers constructed the Constitution with the notion that “all men were created equal.” However, many minorities still struggle for the same rights and opportunities as others. “Mother to Son” and “The Negro Speaks of Rivers” are poems written by Langston Hughes that use symbolism to exemplify the struggles of African Americans as they attempt to persevere through adversity. Hughes utilizes the stairs in “Mother to Son” and the rivers in “The Negro Speaks of Rivers” as his main modes of symbolism.
In the retail stores, managers are complaining of frequent stock outs even though the DC is full of merchandise, which is not moving enough through the supplier, DC, and retail stores. The inventory issue also ties in with transportation problems where accurate lead and delivery times are non-existent. The inventory turnover is not at its full potential because if the DC has merchandise yet the stores are stocked out, the inventory is frozen and will become obsolete.
WHEREAS, Seller owns equipment, inventory, contract rights, and miscellaneous assets used in connection with the operations of its business; and
Royal Caribbean Cruise Ltd (RCCL) has two distinct supply chains which create a unique challenge. Each supply chain is managed by a Provision Master. The first supply chain includes all food, beverage, and lodging inventories that needed for the trips. The second supply chain encompasses “corporate spend” materials, such as office supplies, printing services, hardware and software, printed materials, computer supplies, marine consumables (spare parts, fuel, lubricants, any and all services associated with the ship maintenance and etc).
In the first weeks, our inventory could keep up with the incoming orders in the supply chain which is the ultimate affect of the uncertain customer demand. As the wholesaler, I was dealing with the orders of the retailer who is responsible for the direct customer orders which was stable at
The lives of people of color have long been marked by hardships experienced in order to achieve the American Dream. In the poems “Mother to Son” by Langston Hughes, and “Who Burns for the Perfection of Paper” by Martin Espada, both speak about these hardships, explaining what most people of color deal with, or have dealt with. Though both poems speak out about the hardships faced by people of color, Hughes emphasizes that life is a struggle for all generations that must be fought, while Espada indicates that painful obstacles are part of the journey to achieve the ultimate dream.
Another lesson of the game materialized gradually at first, but steadily became more and more evident with each round of play. This lesson was the demonstration of the overwhelming ineffectiveness and utter futility of approaching logistics from the position of total ignorance. With no forecast or sales history to serve as a guide or predictive tool, the participating supply elements simply had nothing to base their projected order quantities upon other than pure conjecture. Operating in a vacuum relative to the other players of the supply chain was nothing less than counterproductive. Closely related was the development of a subdued, but underlying, sense of hostility within the supply chain as orders were placed that didn’t correspond with anticipated amounts. When this type of communication breakdown exists in the real world, an irritation between supply elements invariably manifests itself. Additionally, the resulting waste of time, material, storing of inventory and other resources expenses further fuel the fires of frustration and discord between supply elements.
Information on vendors can be updated at any time in the future. The user may record purchase orders, bills, and payments made. Both the revenue and expenditure cycle components keep track of what is happening to inventory. Example:. If a user wants to pay for a product for which his or her company has already been invoiced and which the company has received, the user needs only enter the vendor and the invoice being paid.
In the competitive environment, it is necessary for moving products involves reception of products at an intermediate location, store, repackage, clear customs and transport to final destination. The other factor in the supply chain logistics is speed given information flows fast in the internet era. The customer expects everything quick accustomed to the instant status access to the information. With the real time inventory, customer expects the location of the product, it is next scheduled movement and the final delivery schedule.
Just like anything in life, there are going to be certain peaks and valleys to worry about. There is one concept however that tries to make sense of this madness. According to finance.zack.com It is called risk pooling. Risk pooling is mainly used in the insurance industry to try and lower risk for things like earthquakes, fires and hurricanes. This technique will diversify risk between several companies through pooling agreements. In the world of supply chain, this theory suggests that when demand is lower in a certain area, there is probably a different area that is experiencing high demand. Because of this, you don’t have to keep as much safety stock. If high demand and low demand with cancel each other out, than less inventory will be
Inventory management is a method through which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle of the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seen more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company; effective and efficient inventory management is of critical importance.
Sethi, S, Yan, H, & Zhang, H. (2005) Inventory And Supply Chain Management With Forecast Updates New York, NY : Springer.
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,
Lean manufacturing and just-in-time processing are great business strategies that can severely stress a supply chain. The supply chain and supply chain management is a critical operations management element for any major company to succeed and remain competitive in the global market. The supply chain is one of many pieces critical to maximizing value to the end customer and requires close management to minimize external impacts. If a company is relying on another company to supply the raw materials needed for their production line, then impacts to this other company could impact their supply chain. Careful risk management is needed to optimize performance. As a company expands into global markets and global suppliers, this risk and management challenge is multiplied. The global nature of the company could impact important activities such as transportation, funds transfers, suppliers, distributors, accounting and information sharing. Disruption to the supply chain can significantly reduce revenue, cut market share, inflate costs and threaten production. A major disruption would have obvious impacts to profit, but could have additional intangible impacts to the credibility of the company if products are not delivered on time.