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Vendor Managed Inventory (VMI)

Presenter: Arul Murugan, CPIM

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Agenda

• Overview about VMI• Pre-requisites for Oracle VMI• Oracle Architecture for VMI• Collaborative Planning• Configurations for VMI• VMI Benefits• Option 1: Standard VMI• Option 2: VMI with consignment model• Option 3: Track Vendor Inventory without Oracle VMI• Q&A

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Overview on VMI

Vendor Managed Inventory (VMI) is a procurement and planning practice in which a company delegate’s key inventory management functions to one or more of its suppliers. Under this arrangement the supplier determines the items, quantities, and delivery schedules on behalf of the customer based on information it receives from the customer’s inventory and procurement systems.

Using VMI, manufacturers and distributors can anticipate customer needs and provide inventory more proactively than is possible using traditional procurement methods

This Presentation will address how VMI can be accomplished by using a single, well-integrated suite of applications ( Oracle )

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Pre-Requisites for VMI

• Oracle Applications 11.5.8 or• Oracle Applications 11i prior to 11.5.8 with Family pack H for the following modules

– Oracle Inventory– Oracle Purchasing– Oracle Planning (APS)– Collaborative planning is installed and Configured

• iSupplier Portal integrated with Collaborative planning for Supplier Collaboration (Optional)

• For VMI with Consignment model following modules need to be at 11.5.9– Oracle Inventory– Oracle Purchasing– Oracle Payables– Cost Management– Warehouse Management

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Oracle Architecture for VMI

ASCP

Collectes data and Plans for all the items

Collaborative Planning / Supplier Collaboration

Run VMI Replenishment engine

e-Commerce Gateway

Send On-hand / Forecast/ PO to Vendor

Receive ASN, POacknowledgement andchanges from Vendor

iSupplier Portal

Vendor uses portalto Acknowledge PO, Update Promise

date, View On-hand, Forecast,Replenish Inventory, View receipts ,

invoices, payments and otherinformation on-line

Publish On-hand, Forecast, PO and other data for VMI

Supplier Integration

OraclePurchasing

OracleInventory

Oracle OrderManagement

Oracle APS Instance

Oracle OLTP Instance

Publish On-hand, Forecast, PO

Load Vendor On-handas ASN

Data Collection

Existing modules need to be upgradedby applying the lattest 11.5.8 rollup

patch

Need to make configuration changes toenable VMI for selective items

Collection parameters need to bechanged to include user / Company

association

Collaborative planning is a newmodule within APS Suite that need to

be configured for VMI

Large suppliers can integrate to yourOracle system by sending EDI / XML

file for both inbound and outboundtransactions

iSupplier portal need to be installed andconfigured. It is integrated with

Collaborative planning and purchasingmodule

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Collaborative Planning

Customer's ERP /Legacy System

Customers Manufacturer / Distributor

Supplier's ERP /Legacy System

Suppliers

Customer Forecat,Purchase Orders

Revised Forecast,Change Orders

AdvancedShipment notice

Supply Commits

Customer Forecat,Purchase Orders

Revised Forecast,Change Orders

AdvancedShipment notice

Supply Commits

Customer Portal

Supplier Portal

OracleAdvanced Planning

EngineExceptionsExceptions

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VMI Configuration Steps

• Enable VMI at the ASL level (Item – Vendor Combination)• Enter threshold values and other VMI related parameters at ASL level• Setup VMI related profile options• Run initial Data collection with complete refresh including user-

company association• Run VMI Replenishment Engine in Collaborative planning after data

collection• Configure Planner Workbench to handle VMI exceptions by Planners• Optionally Configure to do ‘Auto Replenishment’ by checking ‘Allow

Automatic’ checkbox at ASL• Configure isupplier portal to be linked to Collaborative planning to

effectively use Supplier Collaboration

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VMI Benefits

Benefit for the supplier: The ability to access customer on-hand quantity information, forecast

information, minimum and maximum inventory thresholds, in-transit inventory quantities and expected receipt dates in order to determine when to ship goods

The ability to manually execute an approved purchase requisition or blanket release on the customer system and to track the status of the order through receipt, storage, and consumption by the customer

The ability to automate replenishment proposalsBenefit for the customer: The ability to differentiate between goods that must be replenished by a

supplier from those which are internally planned and replenished The ability to consume VMI materials in Work-In-Process or to explicitly take

responsibility for planning from the supplier as needed The ability to better estimate suppliers production schedules based on

anticipated demand from the customer.

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Option 1: Oracle VMI

View On-handBalances

Monitor On-hand Status

Is AvailableQty < MinThreshold

Create POfrom the

requistion

Run VMIReplenishment

Engine

Vendor / Buyercan release

planned orderinto Requistion

VendorAuthorised to

release ?

Only Buyer canrelease planned

orders intoRequistion

Vendor Shipsthe inventory

Vendors sendsASN throguh EDI

Receive Ithegoods in your

inventory

Pick the materialfor a Sales Order

Fullfill theSales order

VMI Process Flow

Monitor

Replenish

ReceiveGoods

FullfillCustomerDemand

Yes

No

Yes

No

Interface VendorASN into Oracle

( In-Transit )

OwnerShiptransfers fromVendor to yourOrganization

Oracle tracksVendor

Inventoryseperately fromyour invetory by

planningOrganizations

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Option2: Oracle VMI with Consignment

View On-handBalances

Monitor On-hand Status

Is AvailableQty < MinThreshold

Create POfrom the

requistion

Run VMIReplenishment

Engine

Vendor / Buyercan release

planned orderinto Requistion

VendorAuthorised to

release ?

Only Buyer canrelease planned

orders intoRequistion

Vendor Shipsthe inventory

Vendors sendsASN throguh EDI

Receive Ithegoods in your

inventory

Pick thematerial for aSales Order

Fullfill the Salesorder

(Can configure totake ownership at

point of sale)

VMI Process Flow

Monitor

VendorReplenishment

ReceiveGoods

FullfillCustomerDemand

Yes

No

Yes

No

Interface VendorASN into Oracle

( In-Transit )

System will not generate anyaccounting transactions.

On-hand inventory will not bein our books. On-hand

inventory will be tracked byVendor

No accrual takes place** Requires 11.5.9 Upgrade

System relives the invenotory fromVendor and book into your books(All accounting transactions take

place at this point of timeOnly now accrual takes place and

you are liable to pay vendor)

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Option 3: VMI for version prior to 11.5.8For Clients using Oracle applications version prior to 11.5.8 can implement VMI in one of the following ways by extending your Oracle e-business suite to support VMI

1. Create a Separate inventory Organization to stock and track Vendor inventory 2. Use ASN to track Vendor Inventory. As long as the inventory is managed by Vendor it will be considered as ASN In-Transit and when you want to consume the material receive the inventory against ASN into your inventory 3. Load vendor on-hand as vendor Capacity for each item vendor combination in ASL. Optionally load on-hand as MPS entries as

well with ATP option checked and production option unchecked. This will enable to promise customer orders against vendor inventory when ATP is performed in OM

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Profileenrich IT:enrich IT specializes in extending your Oracle E-Business suite with strong expertise in base application. Our unique model allows low cost implementation of quick hit projects for a fixed fee. Our normal implementation time frame is 3 to 8 Weeks and we promise on-time delivery. We partner with you in developing Multi Generation Plan and executing in Quarterly / Monthly Releases

Arul Murugan:Arul Murugan, CPIM is a Managing Principal Consultant with enrich IT and is specializing in the implementation and upgrade of Oracle e-business suite. He has been a functional lead consultant / architect for about 8 years in implementing Oracle for manufacturing and service industry in the areas of Supply chain planning, Manufacturing, Distribution and CRM. Arul has done several successful full life cycle Oracle implementations and also extended the Oracle e-business suite for lot of clients after Go-Live.

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Contact Us

Arul Murugan, CPIMenrich ITManaging Principal Consultant

404-723-1405

Arul@enrichIT.com