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PROJECT REPORT
OPERATIONS MANAGEMENT

GUIDED BY:PRESENTED BY:
Prof. T.T.NIRANJANNITIN BANSAL 129278039
RANJAN SAHU 129278041
ROHIT MANGAL 129278053
SAURABH SINHA 129278057

Project Report On|
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Taxonomy of Implementation Problems in VMI|

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Contents

Executive summary3
Introduction4
Under the typical business model:4
Vendor Managed Inventory model:4
Consignment Inventory:4
Vendor Managed Inventory and Stakeholder’s Challenges5
Challenges faced in implementation of Vendor Managed Inventory7
Analysis of Cases of implementing Vendor Managed Inventory9
Conclusion11
References12

Executive summary
The goal of Vendor Managed Inventory is to provide a mutually beneficial relationship where both sides Customer and Vendor will be able to control the availability and flow of goods more smoothly and accurately. In VMI a manufacturer or distributor assumes the role of inventory planning for the customer. Extensive information sharing is required so that the manufacturer/distributor can maintain a high degree of visibility of its goods at the customer’s location. Instead of the customer reordering when its supply has been exhausted, the supplier is responsible for replenishing and stocking the customer at appropriate levels. Wal-Mart has mastered VMI and is the company against which many other organizations benchmark themselves. This report covers various issues that are to be considered to implement the Vendor Managed Inventory. It is realized in the report that several risks are to be considered while executing VMI. The proper analysis is done in seeking the scenarios where one issue becomes a key factor in deciding to implement VMI or not. Both Marketers and Distributors have their own issues to challenge the implementation of VMI. Focus of the report is to determine taxonomy of implementation problems in VMI.

Introduction
A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributor’s inventory levels. The manufacturer has access to the distributor’s inventory data and is responsible for generating purchase orders. We can see the differences in maintain inventory as: Under the typical business model:

When a distributor needs product, they place an order against a manufacturer. The distributor is in total control of the timing and size of the order being placed. The distributor maintains the inventory plan. Vendor Managed Inventory model:

The manufacturer receives electronic data (usually via EDI or the internet) that tells him the distributor’s sales and stock levels. The manufacturer can view every item that the distributor carriers as well as true point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order*, not the distributor. *Note: VMI does not change the "ownership" of inventory. It remains as it did prior to VMI. Consignment Inventory:

When the supplier places inventory at a customer’s location and retains ownership of the inventory. Payment is not made until the item is actually sold. A VMI relationship may or may not involve consignment inventory.

Vendor Managed Inventory and Stakeholder’s Challenges
Vendor Managed Inventory primarily have various stakeholder’s involved which includes Vendor/Manufacturer or distributor and retailer. Let us examine challenges faced by each: Challenges in VMI Implementation from vendor’s side

High administrative costs: - Suppliers would have to face higher administrative costs. They will have to allocate additional staff resources to properly manage the replenishment activities that were previously managed by the retailer. So to overcome these additional costs, vendors must have to save enough money from the inventory costs and sufficient sales volumes and gross margins Loss of market share due to less shelf coverage: - VMI would help in...
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