Vendor Managed Inventory
Table of Contents
CRP and VMI: Focus on Efficient Replenishment of Products
VMI Background and Objectives
A CRP and VMI Model
The Technology Backbone of CRP and VMI
How Movex Supports VMI
Conclusions: The Future of VMI
CRP and VMI: Focus on Efficient
Replenishment of Products
In response to the current use of supply chain buzzwords, this document aims to explain the concepts of Continuous Replenishment Program (CRP) and Vendor Managed Inventory (VMI). It also describes how Intentia's e-collaboration application Movex supports VMI. Finally, we present both the expected benefits and drawbacks when implementing these initiatives.
CRP is an efficient replenishment concept within the Efficient Consumer Response (ECR) arena. It focuses on improving the flow of products in the supply chain, both forward to the customer and eventually the end consumer, and backward to the supplier.
The goals of CRP are to:
· Increase inventory turns
· Reduce inventory levels
· Decrease stockouts
· Improve customer service levels
· Boost warehouse efficiency
· Enhance your trading partners' perception of value.
Demand Strategy & Capabilities
Common Data &
Supply Strategy & Capabilities
Figure 1. ECR focus areas
Efficient Consumer Response (ECR), Quick Response (QR),Vendor Managed Inventory (VMI) and other similar efforts have had a great impact on today's latest trends, such as Collaborative Planning, Forecasting and Replenishment (CPFR). VMI should be viewed as a stepping stone towards a collaboration process or part of such a process. Its scope is not as wide as the scope of CPFR, but in many situations VMI alone is found to be an extremely efficient method of controlling the supply chain.
VMI Background and Objectives
A term widely used when implementing CRP, Vendor Managed Inventory (VMI) is an arrangement where the supplier, not the customer, decides when and how much of the customer's stock is replenished. It is a way to cut costs and keep inventory levels low throughout the supply chain. VMI focuses on assuring that products are replenished to stock in the most efficient way, without manual information such as orders having to be transferred between customer and supplier. Instead, automatic electronic messages are used to keep track of the current stock situation and planned sales forecasts, so you can determine when it is time to refill the stock and avoid stockouts.
VMI initiatives emerged in the late 1980s when department stores such as Wal-Mart moved to automated VMI.The apparel industry has continued to be a pioneer in VMI ever since. Ironically, industries facing complex situations have been among the last to adopt automated VMI. For example, supermarkets have typically taken longer than department stores to implement VMI.The sheer number of items in consumers' shopping carts and on the supermarket shelves–often more than 25,000 in one store–have meant greater complexity in tracking and using sales data. VMI automation at its peak can be seen in industries such as automotive and paper manufacturing. The objectives of VMI are to:
· Increase in-stock inventory
· Increase sales
· Improve customer service
· Increase gross margins
· Reduce overall inventory in the supply chain
· Stabilize vendor's production.
Another interesting issue that is part of the VMI process is whether the customer should be invoiced directly at shipment...