Vendor Managed Inventory - LOGHEALTHloghealth.mahidol.ac.th/file/file-9-23-2015-6-38-34-PM.pdf ·...

Vendor Managed Inventory

EDI/VMI Concept : Retails Business 2

What is Supply Chain?

Products

Cash

Information

ManufacturerSupplier

Tier 2RetailerWholesaler Consumers

Return

Supply Chain = Entities + Flows

Supplier

Tier 1


Supply Chain Development has advanced rapidly over the past twodecades, with significant change expected in the near future

Themes of Supply Chain Development

ConsumerProduction DistributionSupply

2000’s

Customer Sophistication

Power of IT

Extended

Enterprise

ConsumerProduction DistributionSupply

1990’s

ECR

(Retail Industry)

Cross-

functional

Production DistributionSupply

1980’s

JIT

(Automotive Industry)

FunctionalConsumer

IndustrialTrend


External Supply Chain

4

Supply Chain Development Evolution

Internal Supply Chain

Stage (1)

Functional Focus

(1) The efforts tend to be confined within SILO Functions by focused on internal improvement

Stage (2)

Internal Integration

(2) Break down internal walls, and works on corporate integration. The various parts of the company start to cooperate and align

Stage (3)

External Integration

(3) Take external view and closer focus on the Customer Satisfaction by brings Trading Partners and suppliers into the discussions, start collaborating and sharing information

Stage (4)

Cross-Enterprise

Collaboration

(4) Move toward truly automated connections between businesses. Partners share information electronically, which lowers production cycle times. Inventory can be viewed on a real-time basis so forecasting errors can be diminished.


The key to effective Supply Chain Management is

supply chain integration - ensuring that all part of the

supply chain work together, rather than at cross-purposes.

Product range and flow of goods

StoresLogistic and

InfrastructureSuppliers

Communicating Demand

Efficient Supply Chain Management

Concept


Life before VMI – Group Discussion

• รอการอนมตเปด PR/PO • รหส สนคาผด• ไมไดรบ PO • รออนมตวงเงน• ลกคา Order จ านวนมากผดปกต• สงจ านวนนอยไมสามารถสงได • ออเดอรดวน• Unbalance Workload


VMI – เปนเรองทอยชวตประจ ำวนของเรำ


ตวอยำง VMI ในธรกจคำปลก

Continuous Replenishment Program (CRP) is Top10 Supply Chain Innovation

Since 1987 (2530)


Inventory Management Evolution

VMI initiatives emerged in 1987 when department stores such as Wal-Mart moved to automated VMI. The apparel industry has continued to be a pioneer in VMI ever since.


source suppliers manufacturesdistributors

retailers/customers

consumers/end users

source suppliers manufacturesdistributors

retailers/customers

consumers/end users

Note: หำกมกำรแชรขอมลใหกน ท ำใหผท อยปลำยทำงสำมำรถคำดกำรณกำรผลตไดแมนย ำยงข น

การเตมเตมสนคาโดยใชความตองการของผบรโภคทแทจรงเปนตวขบเคลอน

CRP (Continuous Replenishment Program)


Vendor Managed Inventory (VMI) is a partnership

whereby the supplier gets the responsibility of having

enough stock available at the Customer/Retailer's

Warehouse in order to meet the demand from the stores.

What is VMI?

But VMI is more than that: it is about

collaboration, it is about sharing data, together taking the responsibility to

meet the customers demand and

finding the best ways to achieve that.


EDI Order Proposal

EDI INVTRPT

EDI PO

Product/Invoice

ReceivingShipping

Retailer / Customer DCSupplier DC Retailer StoreSupplier Factory

Product/Invoice

ReceivingShipping

Store Order

Product/ Packing List

ReceivingShipping

LT 24 - 48 Hrs.LT 20-24 Hrs.LT 12 Hrs.

Vendor Managed Inventory (VMI)


เปนกำรจดกำรกำรไหลของสำรสนเทศ (Managing flow of information) ตลอดหวงโซอปทำน เพอใหเกดควำมตอเนอง

เพอลด “Bullwhip Effect”

VMI is SCM Best Practice

BusinessModel


VMI

Supplier Manufacturer DC

/ Factory

Customer/

Retailer DCRetailer Stores Consumers

Products

Integrated Information

Transportation

Extend VMIExtend VMI

VMI Business Model

Who we are in Supply Chain?

How is our Supply Chain Network?


Ownership of Inventory

• Ownership transferred to customer/retailer upon receipt of goods at DC

• Ownership transferred to customer/retailer when goods ship from DC to Stores

• Ownership transferred to customer/retailer when goods sold to consumer from Stores

• Ownership transferred to customer/retailer upon receipt of goods at DC but payment due to Point-of-Sales information


Management of Inventory

Customer managed their owned inventory

Supplier managed customer’s inventory with their system

Supplier managed customer’s inventory with customer’s system

Benefits


Why our company want to do VMI?

Why our customer want to do VMI?

Why our supplier want to do VMI?

Group Discussion


Typical Benefits to Manufacturers / Suppliers

• Lower inventory investments (raw and finished)

• Better scheduling and planning

• Better market information

• Closer customer ties and preferred status


Typical Benefits to Customers / Retailers

• Fewer stock-out with higher inventory turnover

• Better market information

• More optimal product mix

• Less inventory in channels (transfer costs)

• Lower administrative replenishment costs


Benefit of VMI Project: Retailer

1. Reduction in Stock Cover Day

Result Initial value Target Current (May)

Stock cover day at DC (Days) 12.5 6 7

Stock Value at DC (MBaht) 17.8 11.2

For Example

VMI can reduce inventory level from 12.5 days to 7 days

that close to the Target and saving working capital

6.6 Million Baht. We also can reduce inventory holding

cost and more Space at our DC.


2. Increase in Service Level

Result Initial value Target Current (May)

Service Level Supplier to DC 97.50% 98% 100%

Service Level DC to Store 98% 98% 100%

Out of stock at shelf 2% 1% 1%

For Example

VMI can improve service level higher than Target and

achieve out of stock at shelf 1% target. So we quite

sure that our products will always available for customer

and can minimizing loss sales opportunities (increase sales).

Supplier can do well because they have less SKU to manage.



• Better and predictable delivering (quantities, time of delivery)• Less wastage in supply chain (Shelf Life)• Less rush orders / issues• Fully gain promotion margin



• Increase performance (service level) and potential less out-of-

stock/increased sales

• Better and predictable ordering / delivering (also upstream) /

manufacturing

• Stabilize manufacturing planning (when retailer has large share of

volume of supplier)

• Decrease of inventory levels (if VMI is connected to manufacturing

/ planning process)

• Less wastage in supply chain (especially perishable products)

• Less rush orders / issues

• Simplified supply chain process

• Integral cost reductions

• Preferred supplier status

Benefit of VMI Project: Supplier

1. Pre-requisites

2. Framework

3. Development

4. Replenishment

5. Issues

6. Evaluation

Forecast quantityneeded at retailer

Define settings

Fra

new

ork

Develop VMI-agreement

Develo

pm

en

t

Send store orderdata

(including initial storeorder on promotions)

Performance datasend to evaluation

tool

Rep

len

ish

men

tIs

su

es

Evalu

atio

n

Content VMI-model: Products / shipping points Item / del ivery profi les Communication model / roles and

responsibi l i ties Metrics/ KPI's Type of model

Joint supplier andretailer activities

Retailer activities

Template

Template

START:Intention agreementNo forward buying

Legacysystems

Distribution

Ahold VMI Business model

Content VMI-agreement: Objectives Information exchange Resources and sponsorship Investments / costs and benefi ts Playing field / penalties and Bonusses T ime frame Evaluation / review cycle Resolution of disagreements Sign-off

Supplier activities

Send ASN /DesAdv to retailer

File: 20011109 Ahold VMI v21

Pre

-req

uis

ites

Build VMI-modeland shadow

testing

Create order toreceive shipment

Receival andcheck of shipment

Issues?

Shipment toretailer's

warehouse

Solve

Yes

No

Develop VMImodel

Historical data(including order

versus sales upl i ft)

OP

ER

AT

ION

AL

VM

I

CPFR salesforecast (1)

Calculateshipment order

Send inventorydata

Legacysystems

(1) To be used when CPFR is in place

Ahold Worldwide Exchange department

Henk van der Heide

VMI Business Process


- Trust and Commitment

- EDI System, ebXML, RosettaNet

- Replenishment Software (VMI System)

- Comply with EAN/UCC Barcode Standard

- Manage all SKUs (Normal & Promotion)

- Reduce lead time less than 1 days

- Agreed in KPI and Target

- Committed Resources

- Stop Forward Buying

1.Pre-requisites


Develop VMI Agreement- Objectives

- Information Exchange

- Resources and Sponsorship

- Investment

- Playing Field / KPI & Targets

- Time Frame

- Evaluation / Review Cycle

- Resolution of Disagreement

- Sign-off

2.Framework


VMI Success Factors

• Top management commitment

• Focus on effort

• Trust and partnership between supply chain stakeholders

• Highly effective computer/information systems (EDI, Bar coding, Scanning)

• Competent manufacturers and the ability to forecast

• Willing stakeholders partners and patience


0

2

4

6

8

10

12

14

16

be

fore

VM

I

be

fore

VM

I

be

fore

VM

I

Ja

n

Fe

b

Ma

r

Ap

r

Ma

y

Ju

n

Ju

ly

Au

g

Se

p

Oct

No

v

De

c

Da

ys

Co

ve

r

90

92

94

96

98

100

% S

erv

ice

Le

ve

l~ 50% stock reduction

(~7 days)

Service Level > 98% both Unilever to Tops

DC and Tops DC to Stores

Stock Cover Day Service ULT to Customer DC Service Customer DC to Stores

VMI Performance - Unilever


VMI Results: DC Stock Level in Days

VMI Supplier Initial value Target Current (Jan)

P&G 18 7 10.8

Unilever 14 6 8.9

KC 14 6 6

KAO 20 6 6.1

Colgate 12 6 7.8

Dumex 12 6 6

Nestle 12 6 21.7

Sahaphat 19 6 13

Total 15 6 10


VMI Supplier Initial value Target Current (Jan)

P&G 91% 99% 98%

Unilever 94% 98% 99.6%

KC 96% 98% 99%

KAO 90% 99% 99.8%

Colgate 96% 99% 98%

Dumex 93% 99% 87%

Nestle 91% 98% 98.5%

Sahaphat 93% 98% 94%

Total 93% 99% 97%

VMI Results: Service Level Supplier to Retailer DC

Vendor Managed Inventory - LOGHEALTHloghealth.mahidol.ac.th/file/file-9-23-2015-6-38-34-PM.pdf ·...

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