Vendor Managed Inventory (VMI) - SCM Inventory  -  EXTREMLY HOT  COURSE - HUGE DEMAND!!!!

The aim of Vendor-Managed Inventory (VMI) is to integrate key customers in supply chain planning. It is particularly advisable to implement VMI in the following circumstances:

·         If key customers constitute a high percentage of the vendor’s sales figures,

·         If the products are standardized and requested repeatedly,

·         If product growth is not excessive, requirement patterns are stable and you can assume that requirements will not occur spontaneously, 

·         If the transaction costs for order processing and production planning are high.

In the traditional replenishment process, the customer has to create an order for the vendor at every step in the supply chain. The customer does not give prior notification of requirements, which means that the vendor is compelled to store safety stock that acts as a ‘buffer’ for all eventualities. The customers also have safety stock available of the same items as a protective mechanism in case they do not receive the required stock. This procedure leads to a larger amount of stock in the entire goods supply chain and, paradoxically, to a reduced level of customer service and a poorer response level.

Through vendor managed inventory programs, manufacturers can offer their customers a value added service by performing the replenishment planning task for their business partners. Besides giving the manufacturer increased visibility into actual consumer demand, VMI also recognizes that often vendors may have better decision-support systems in place and more knowledge and control over the logistical processes. By increasing visibility into actual consumer demand as well as customers inventory levels, VMI programs allow manufacturers to make better decisions on how to deploy goods across various customers, which leads to increased customer service levels, lower transportation costs, reduced inventory levels and lower sales cost.

This course also shows how suppliers and customers (manufacturers) collaborate by sharing information and exchanging plans via the Supplier Managed Inventory (SMI) process, available on the web with the SAP Inventory Collaboration Hub (ICH). The map further illustrates the business benefits of this supply chain collaboration process. The SMI process is a supplier-driven replenishment and planning process, which is based on min/max stock balance levels, on current demand, in-transits and planned shipments.