Procurement & Materials

Management

Vendor Managed Inventory

Group 6
Praveen S | M102-18
Sanjeev Kumar N | M175-18
Siddharth K. Sharma | M190-18
Vijay Saam T | M192-18
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Efficient Consumer Response

• Concept of supply chain management

first applied at a Grocery store - ECR
Efficient Consumer Response

• Apparel Industry used the concept of Quick

Response

• Later stages saw the development of

Continuous Replenishment (CR) - Transfer
of PO from Distributor to Supplier

• CR is a process of Restocking, where the

producer sends to the Distribution centre
full loads whose composition varies
according to sales and in conformity with a
prearranged level of stock.

• CR is popularly known as Vendor Managed

Inventory (VMI)
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Requirements for VMI Implementation

• Continuous flow of information from Distributor to Supplier

• Investment needed to achieve integration between partners
• Arrival of a Critical trading volume
• Shorter distance between parties

Key Characteristics of VMI

• Short replenishment lead times

• Frequent and punctual deliveries - optimizes production and transport planning
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Application of VMI in Electrolux Group

• Electrolux group had to change their traditional Push flow to Pull flow, based direct on the demand of final customers.

The idea behind the use of VMI method towards sale companies is to implement “pull” control concept: manufacturing and production is controlled by market
demand, its trends and seasonal nature, in other words Actual Sales of SC.

• From the below figure, actual orders placed by SC with producers disappear. Moreover planning the quantity to be shipped to sales companies is the
responsibility of the producer.

• The system used is called the Electrolux Forecasting and Supply system (EFS-95), functioning on the IBM AS/400 hardware package.
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Application of VMI towards Suppliers

• Replenishment calculations between the factory and the SC not done by supplier but by the production plant.

• But all data such as sales orders, supply level, forecasts, etc. Are however transmitted and shared with suppliers.

• EDI with extranet is used in 75% of communication between the parties.

VMI provides significant advantages
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to factories that needs:

• Immediate response to customer’s various requirements

• Higher level of customer service
• Few errors due to elimination of paper works
• Increased market visibility
• Improved planning and reduced re-planning
• Stock reduction throughout the supply chain
• Better management of risks and opportunities
• Greater sales
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Comparison between traditional and VMI

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Comparison between traditional and VMI