Advantages Of Vendor Managed Inventory

The topic has been chosen for research is to critically evaluate the inventory management systems of retail industry in UK. This industry is continuously growing up with pleasure of customers even the fluctuation in customer choices. Moreover, this sector has been hugely impacted from 2008 to 2010 by the economic crisis, when customer did not have enough money to spend. As a result some retail businesses have incurred a loss and shut down their operation. Though some of the retailer took the challenge and continued their business to see the future success. But inaccuracy of stock count leads to poor availability in store level stock. Moreover employees’ inadequate level of skills and improper management clue to poor control of inventory management. As a result decrease the customer satisfactions therefore fall in revenues and ultimately collapse in profitability level. (Lussier, 2012)

To be successful in today’s business environment, an organization must be able to perform certain fundamentals accurately and efficiently. One of these elements is having an effective and efficient Inventory System Management (ISM). ISM enables one to have the knowledge of where his or her inventory is at every step of the way. This allows one to better interact with consumer and make sales. Choosing the right ISM can lead and pave the ground work for future business success and profitability.

During the game, I realized that wide gaps in orders of every role in the supply chain such as factory, distributor and retailer create inventory management challenges. For example, distributor records 0units between week1-week 4 compared to retailer within the same period. The retailer records 3units, 5units, 2units and 2units between weeks 1- week 4. The same applies to factory with 0units from weeks 2-4. Addressing inventory management problems requires developing an average unit level to avoid disappointing customers when demand

Schenck, J., McInerney, J. 1998. Applying vendor-managed inventory to the apparel industry. Automat. I.D. News 14(6) 36-38

the safety and environmental regulations of importing countries. The US and the EU had their

Enterprise Resource Planning (ERP) is extended to suppliers, customers, and other business partners to enables both smooth integration of a different company business systems as well as effective and secure communication. ERP would facilitate collaboration in its business processes. Supply chain management (SCM) manages the supply chain end-to-end processes that start with the design of the product and end when it is sold, consumed, or used by the end consumer. SCM is to reduce uncertainty, variability, and risk, and increase control in the supply chain, thereby positively effecting inventory levels, cycle time, business processes and customer service. Collaborative planning, forecasting, and replenishment (CPFR) is a business practice in which suppliers and retailers collaborate in planning and demand forecasting in order to ensure that members of the supply chain will have the right amount of raw materials and finished goods when they need them. Collaborative planning is designed to synchronize production and distribution plans and product flow, optimize resource utilization over an expanded capacity base, increase customer responsiveness, and reduce inventory.

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

Outsourcing: Outsourcing the inventory function to Global Logistics who would be responsible for warehousing, inventory management, and order fulfilment (including picking, packing and shipping). This would enable the company employees to focus more on sales and expansion of the company while ensuring that the inventory management is in able hands.

Calculating the benefits of vendor managed inventory in a manufacturer-retailer system (Bookbinder, Gumus, & Jewkes, 2010)

Effective supply chain management can provide an important competitive advantage for a business marketer, resulting in improved communication and involvement among members of the chain, increased motivation, and decreased costs. Tracking the movement of and demand for components used to manufacture a product across a variety of potential and actual suppliers, provides insight and the ability to respond instantly to shortages, surpluses, and changes in market conditions. It seeks to optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce cost.

Vendor managed inventory (VMI) is 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

As director of Supply Chain Systems, Teri Takai recommends implementing virtual integration strategies from companies like Dell to portions of Ford’s supply chain strategy. Although there are several key differences between the companies, the restructuring plans of Ford 2000 have set a viable foundation to implement Dell’s virtual integration strategy in inventory management, customer service and support and suppliers’ management. The redesign of the process must include design not only of the supply chain but also of fulfillment, forecasting, purchasing, and a variety of other functions that historically been considered independently within the Ford hierarchy. Teri

In in traditional inventory management the buyer manages his own inventory. The buyer is responsible for maintaining stock levels to support his requirements. In VMI the supplier manages inventory for the buyer based on the information received from the buyer. But many industries avoid opting for VMI as it makes the dependable on its suppliers and leads to transfer of full control to them.

In vendor managed replenishment, the supplier (vendor) manages the sales forecast and replenishment functions for the customer. In many situations the customer is a distributor or retailer as with Heinz, major retailers are his major retailers for example – ASDA (supper market) one of the major retailer for Heinz and customers data base. The EDI transactions used by Heinz are typical of most vendor managed replenishment applications. The customer transmits a transactions (EDU 852) each day that contains the current on hand balance and movement data. This is the information Heinz UK need to forecast the product for its customers and to calculate the planned replenishment orders. The movement information is total shipment quality for each

HANA KIMI CO. would like to adopt an online Supply Chain Management System (SCM) whereby the customers may buy company 's products online via company 's website and able to track the status of the order including the availability of the stocks by integrating the Online Sales System with the company 's Inventory, Manufacturing and Production System.