Vendor Managed Inventory Case Study

1. Vendor Managed Inventory (VMI)

Vendor Managed Inventory (VMI) is a method of optimizing the operation of the supply chain in which the supplier is responsible for the level of inventory of the retailer. Suppliers have access to the inventory data of the retailer and are responsible for coordinating the orders.

As companies in the supply chain decide to work together, the result of this collaboration is usually better information exchange, coordination processes and activities are improved (on the basis of support). each other). An example of this collaboration is the VMI model, where the buyer allows the supplier (ie, the seller) to manage the entire replenishment process, and is responsible for controlling the inventory. Of the retailer.

Suppliers will regularly make new orders, how and when. As a result, instead of waiting for the retailer to order, the supplier manually regulates the supply deals. VMI is an efficient supply chain that helps suppliers meet their needs without being hampered by purchasing decisions in the retail chain (the bullwhip effect). In addition, VMI is designed to eliminate or at least minimize supply gaps, as well as cut costs for all members of the supply chain. Accordingly, the measure of vendor efficiency is not the delivery time but the amount of goods available and their

A delivery request for a non-urgent retailer will be delayed one to two days to facilitate delivery to another retailer who needs more. Similarly, a smaller additional order from a retailer will have to prioritize a larger order from another retailer who is in dire need of it. With the ability to balance the needs of all partners, the supplier can improve the efficiency of the system without compromising the interests of any retailer. Retailers benefit from the assurance that the most urgent need is to receive the most effective attention. Without VMI, suppliers will have difficulty in prioritizing efficient shipping.

An interesting effect of VMI is that shipping service is also improved for other retailers not participating in VMI but buying from VMI participating suppliers to other retailers. This is the result of th

e ability of the supplier to plan production more efficiently, thus enhancing delivery services in general. In addition, increased sales as a result of service level improvements, stemming from more available products. Thus, profitability is increased for all businesses in the