Vendor-Managed Inventory at NIBCO

NIBCO has 100 years history and $ 400 million revenues. The main product is flow control like valves, fitting, and hangers so on. Compare to other same types of manufacturers, NIBCO wants to provide low price and differentiation of flow control products. In these days, the product quality is not only a requirement among the commodity markets. The value-added services also are good ways to attract more customers. However, when NIBCO wants to give value-added services to customers, the old system cannot suit their needs. The managers of NIBCO decided to use SAP R/3 implementation project, which helps them to deal with issues. From 1998 to 2001, SAP R/3 implementation has run smoothly in NIBCO. As a supply chain business processes, the improvements are both in supply-side and customer-side. The SAP implementation begins a demand-pull system instead of forecast push-system in NIBCO. Further on, NIBCO wants to reduce costs, improve customer satisfaction, and increase revenues. Vendor-managed inventory (VMI) program and a multiple customer service channels were initiated to enhance customer loyalty and increase electronic ordering. Wirelesses scanning for warehouse management and inventory replenishment policies were constantly processed to improve worker productivity and order fulfillment accuracy. Raw material purchase consolidation, followed by supplier-managed inventory pilots results in cost savings practices. Therefore, NIBCO uses vendor-managed inventory (VMI) program to meet their wants. After using this approach, NIBCO builds closer relationship with key customers.

Key Accomplishments
Improved Customer-Facing Metrics
• Increased from 30% to 87% in perfect order rate.
• Enhanced on-time delivery rate from 60% to 99%
• Stock outs decreased from 11% to 2%
• For key customers, decrease in order-to-ship times (from more than 48 hours to 8 hours). • Improvements for the customers with which NIBCO conducts VMI: improved average inventory turns 75%