Mba 2nd Semester Mb0044
Master of Business Administration - MBA Semester 2
MB0044 – Productions & Operations Management
Assignment Set- 1
Q.1. What do you understand by Vendor-Managed Inventory (VMI)?
Ans:
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. •
MB0044 – Productions & Operations Management
Assignment Set- 1
Q.1. What do you understand by Vendor-Managed Inventory (VMI)?
Ans:
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. •