MB0044 – Productions & Operations Management
Assignment Set- 1
Q.1. What do you understand by Vendor-Managed Inventory (VMI)?
Some firms have successfully improved their supply chain performance by implementing an approach known as Vendor Managed Inventory (VMI). With VMI the vendor specified delivery quantities sent to customers through the distribution channel using data obtained from EDI. Vendor Managed Inventory (VMI), Just-in-Time Distribution (JITD), and Efficient Consumer Response (ECR) all refer to similar concepts, but applier to different industries. For Ex, the grocery and apparel industries tend to use ECR, where as the automobile industry tends to use VMI and JITD. The VIM Approach
VMI reduced stock-outs and reduced inventory in the supply chain. Some featured of VMI include: • Shortening of the supply chain
• Centralized forecasting
• Frequent of inventory, stock-outs and planned promotions. Electronic Data Interchange (EDI) linkage facilitates this communication. • No manufacturer promotions
• Trucks are filled in a prioritized order. For example, items that are expected to stock out have top priority, then items that are furthers below targeted stock level , then advance shipments of promotional line items ( promotions allowed only in transition phase) , and finally, items that are least above targeted stock levels. • Relationship with downstream distribution channels
• Result: Inventory reduction and stock out reduction
VMI Implementation Challenges
VMI can be made to work, but the problem is not just one logistics. VMI often encounters resistance from the sales force and distributors. At issue are roles and skills, trust and power shifts. Some of the sales force concerns are: • Loss of control
• Effect on compensation – incentive bounces may depend on how much is sold, but sales force has less influence under VMI. • Possible loss of job
• Skepticism that it will function well- technical problems • Concern that reduced inventory will result in less shelf space and therefore loss of market share. This concern can be addressed by filling the shelf space with other stock keeping out units from the same vendor. Distributors also may have concerns about the VMI, including: • Inventory will be pushed on the
• No more promotions , discounts and forward buying
• With less inventory , more risk of disruptions due to strikes, adverse weather, etc, • The vendor enjoys the benefits while the distributor gives up its only level of power- data on what the retailers want. • Danger of being replaced – vendor may decide to forward integrate. Addressing concerns
For a VMI system to work, the concerns of distributors and the sales force must be addressed. They can be atleast partially addressed by the following:
• Transform the sales role into one of marketing. For example, bonuses can be paid based on the number of new clients. • Distributor skepticism can be addressed by implementing a pilot program with vendor owned warehouses in order to demonstrate that the system works , Introduce system in distributor – owned warehouses on a pilot basis • Engage a neutral consultant in meetings among the vendor, distributor and sales force. • Allow some manufacturer promotions in the transition • Extensively simulate the system off-line before implementing,
Q.2 Explain briefly the four classifications of scheduling strategies & its approaches.
Scheduling strategy differs from organisation to organisation as it depends on the quantum if production, size and type of production, company’s policy, priorities, etc. Most of these strategies are concerned with job shop production since the problems encountered is more when more than one product is produced in the same plant.
Following are the classifications of the scheduling strategies:...