OMSAN LOJİSTİK

Vendor Managed Inventory (VMI)

Inventory Planning and Management

Latin America Logistics Center

Logistics Management Series -

Vendor Managed Inventory (VMI)

• A Supply Chain Management Concept by which the Supplier Replenishes the Customer Stock at his own Discretion

Vendor Managed Inventory (VMI)

• Typically uses Point of Sales information to define replenishment needs

• Use demand forecast information

• The supplier is the owner of product until it has been sold or used

Vendor Managed Inventory (VMI)

• The Goal is to produce a Highly Efficient Supply Chain

• A Supply Chain in which Perfect Product Quantities Directly from producer to Distributor

VMI – Benefits to the Supplier

• Lower Inventory Levels

• More Accurate and Detailed Information of Demand Trends

• Forecast Algorithms based on Demand

• Increased Relationships with Retailers

Control vs. Efficiency

• Typically Retailers Refuse to participate because they do not want the supplier know what product and in what quantities they have on the shelf

Benefits to the Retailer

• Risk Elimination

– They do not pay the stock that is not sold

• Opportunity Costs Reduced

– They do not have to invest in keeping inventories that

may not sold

• Improved Inventory Management

– It is the supplier’s interest to keep the shelves filled with

his product

Benefits to the Retailer

• Customer Satisfaction Increases – The Customer Wants Product

• Fresh Product Available – It is the Supplier’s Interest to keep fresh product of his brand

• Less Paperwork – With VMI, the retailer is focused in dealing with customers not ordering product

or returning product out or date

• Reduce Order Size – With VMI, the supplier can replenish as often as he wants

• Increases profitability – Both parts increase profitability because of the improved efficiency

Key for Success

• Strong Demand Forecast– Retailers must bring sales information to

the supplier of each product on shelves

• Replenishment Capability– VMI software produces forecasts to

replenish each SKU– The system defines the delivery cycle

Information Requirements

Visibility, Visibility, Visibility!

A Robust VMI Software, helps to the data management process to Define

Customer Fill Rate in advance to Unexpected Sales keeping

management and delivery costs low

How does VMI work?

Software VMI

Order

Supplier CustomerPOS

Product

Ask yourself...

• Cost/Benefit Ratio?– Less Inventory?– Additional Sales?

• If the answer is NO to any of the questions…

– Evaluate Alternative Options

If your Customer asks for VMI, Ask yourself...

Will this account benefit

from VMI?Is this a

StrategicAccount

Does it NeedAdditionalInvestment

In Stock

Can we AffordThe Extra

Investment?

Will theSales Grow?

If your Customer asks for VMI,

Ask yourself...Will Customer

ServiceImprove? Information

SystemsInvestments?

OrganizationalClimate?

InventoryControlPolicy

JointForecast?

Supplier

Translator

Inventory

Translator

PlanningSystem

Customer

Purchasing

Translator

Translator

Order Management

855 – Order Recognition

852 – Stock Activity

VMI - Data Transfer

VMI – Vendor Manager Inventory

CustomerDC

DC

CustomerDC

Plant

Inventory Status, Forecast?

Order Recognition

When to use VMI?

Product with high volume and turns Product with steady demand and low

variance Forecast errors lower than 25% Continuous Review Inventory Control

Policies Visiblity and Compatibility of Customer

Needs information

Quick Response

• Guaranty delivery of the right product Quantity in the right moment.

• Includes POS information to Forecast Demand • Response to Market drives the relationship

between customer and supplier and defines performance indicators

• QR is widely used USA amongst manufacturers, distributors, logistics operators, transport providers etc.

Supply Chain ManagementInformation Systems

Logility Planning SolutionsLogility Planning SolutionsTMTMLogility Planning SolutionsLogility Planning SolutionsTMTM

Demand Chain Demand Chain PlanningPlanningTMTM

Demand Chain Demand Chain PlanningPlanningTMTM

Supply Chain Supply Chain PlanningPlanningTMTM

Supply Chain Supply Chain PlanningPlanningTMTM

Resource ChainResource ChainVoyagerVoyagerTMTM

Resource ChainResource ChainVoyagerVoyagerTMTM

•Demand Planning

•Inventory Planning

•Event Planning

•Replenishment Planning•Manufacturing Planning•Logistics and Transportation Planning

•Demand Chain VoyagerTMTM

•Supply Chain VoyagerTMTM

Fuente: Logility, Atlanta