VMI.pdf

Using Vendor ManagedInventory (VMI) in OracleApplicationsAn Oracle White PaperJune 2002

VENDOR MANAGED INVENTORY

Vendor Managed Inventory (VMI) is a procurement and planning practice in whicha company delegates key inventory management functions to one or more of itssuppliers. Under this arrangement the supplier determines the items, quantities, anddelivery schedules on behalf of the customer based on information it receives fromthe customer’s inventory and procurement systems. Using VMI, manufacturers anddistributors can anticipate customer needs and provide inventory more proactivelythan is possible using traditional procurement methods.

Today there is a great deal of interest in VMI owing in part to its implementation byhigh profile companies spanning industries as unique and varied as retail,automotive, high-tech and health care. These industries cite greater inventory turns,fewer stock-outs and reduced production down times as primary benefits realizedfrom adopting VMI programs. With VMI, companies are realizing increases inavailable working capital, reduced inventory holding costs, and ultimately increasedcustomer satisfaction and profitability.

Successful VMI programs are far more achievable now than they were ten years agothanks to the availability of technology solutions that meet VMI requirements in aneconomical way. This can be done through customized solutions tying togethervarious data warehousing, planning applications, procurement systems, and webservices. Alternatively, VMI can be accomplished using a single, well-integratedsuite of applications. Either way, a complete VMI solution should offer:

For the supplier:

• The ability to access customer on-hand quantity information, minimum andmaximum inventory thresholds, in-transit inventory quantities and expectedreceipt dates in order to determine when to ship goods

• The ability to manually execute an approved purchase requisition or blanketrelease on the customer system and to track the status of the order throughreceipt, storage, and consumption by the customer

• The ability to automate replenishment proposals For the customer: • The ability to differentiate between goods that must be replenished by a supplier

from those which are internally planned and replenished• The ability to perform tasks such as receiving, inspection, and put-away without

regard to the procurement method (there must be no required change in thesepractices to support VMI)

• The ability to consume VMI materials in Work-In-Process or to explicitly takeresponsibility for planning from the supplier as needed

• The ability to better estimate suppliers production schedules based onanticipated demand from the customer.

Using Vendor Managed Inventory

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Oracle Applications Support for VMI

Oracle Applications provides integrated support for VMI beginning from Release11i Family Pack H. In order to use this business process, you must have OracleInventory, Oracle Purchasing, and Oracle Collaborative Planning up to Patch Set H(or 11.5.8) as a pre-requisite.

Note: While VMI and Consigned Inventory often exist simultaneously, they are not synonymous terms.

Patch Set H provides support for VMI only.


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Monitor StatusUnder MinQty? No

Yes

View OnHand

Balances

Enter OrderYes SaveRequisition

Import Reqin PO

AutomaticRelease?

Receiveagainst newBPA release

Deliver toSubinventory

PerformMisc.

Transactions

PerformPlanningTransfer

Yes

or

Monitor

Route &Receive

RequestGoods

ManualReplenish

ExamineProposedRelease

ReleaseRequistion

Import Reqin PO

Run VMInettingengine

No

AutocreateVMI Req toBPA release

Receiveagainst newBPA release

No

WIPTransfer, SO

Issueor

End

Updates

Store &Consume

Using Oracle’s VMI solution, the supplier and customer:

• Monitor: The VMI supplier logs onto Collaborative Planning and monitors thecurrent level of inventory items. This view of inventory is restricted to thoseitems for which they have planning responsibility. Suppliers can see thebalance of on hand stock, in-transit quantities entered on ASNs, openrequisitions and purchase orders, and other pertinent information such asforecasts.

• Request Goods: Based on this information, the supplier can either manually or

automatically request goods for shipment to the customer. A request results inthe creation of an approved purchase requisition in the Purchasing application.The customer can manually assign these requisitions onto a blanket order withthe VMI supplier, or set up the system to have this process completelyautomated. The supplier will then be able to make a shipment upon approval ofthe blanket release.

• Route and Receive: The customer records receipts in the ordinary fashion,

optionally inspecting goods for quality conformity , and delivering the goodsinto stock. During the procurement cycle, quantities are collected and made

1. VMI ProcessOverview


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visible to the supplier so that they can be tracked during all stages throughdelivery into stock.

• Store and Consume: Once the customer moves the goods internally, issues them

to WIP or sells them, the quantity of stock visible to the supplier is decremented.

Oracle Purchasing, Inventory and Collaborative Planning are used to provide end-to-end coverage of the VMI procurement cycle.

PREPARING TO USE VMI

VMI Setup PrerequisitesBefore using VMI, you should perform the following setup steps in OracleInventory, Purchasing, and Collaborative Planning.

Profile Options to Set for VMIThere are a number of system profile options that have a bearing on Oracle’s VMIsolution:

• FND: Debug Log Enabled: should be set to No (or Null). • ICX: Session Timeout: should be set to No (or Null).

• PO: Automatic Document Sourcing: the following options exist:

1. Yes - purchasing will automatically source documents from the mostrecently created blanket agreement

2. No - the Approved Supplier List (ASL) is used to determine the blanketagreement. You must indicate the source document to use in theApproved Supplier List Attributes form.

You may select either setting for this profile option, based on your requirements.See additional setup information below concerning setups related to automaticdocument sourcing.

• PO: Convert Requisition UOM to Source Document UOM: this profile optioncontrols the functionality of Autocreate/Create releases. The following optionsexist:

1. Null - Autocreate will not convert the requisition unit of measure to theblanket purchase agreement. Create Releases concurrent program isunaffected by this setting and will always convert requisition lines in adifferent unit of measure to that of the blanket agreement.

2. Yes - any method for release creation would convert the requisition lineunit of measure to blanket agreement line unit of measure.

3. No - None of the methods would convert the unit of measure.

The recommended setting for this profile option is ‘Yes’ when VMI is used,since it is possible for the supplier to suggest replenishments in a different unitof measure than the documents controlling the agreement.


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• PO: Release during ReqImport: this profile option controls the creation ofblanket releases. The following options exist:

1. Yes - blanket releases will be generated when ReqImport is run,depending upon the Release Method setting in the Approved SupplierList (ASL).

2. No - releases will not be generated despite the ASL settings. You mustrun the Create Releases concurrent program separately in order togenerate releases.

The recommended setting for this profile option is ‘Yes’.

Item Attributes for Use with VMIYou can use VMI for any item so long as it is purchasable and contains sufficientdefault information to process the item through requisition import. You need toinclude a default list price and an MRP planning method in order to begin using theitem for VMI.

You must name a Planner on each item for which VMI replenishment applies,generally the employee responsible for managing or overseeing the VMI relationshipwith the supplier. You can name the Planner in the General Planning tab of the Itemform located at Inventory > Items > Organization Items.

Concurrent Program with VMIVMI Replenishment Engine: this concurrent program performs the releasecalculations and presents the results on Collaborative Planning. The VMI NettingEngine concurrent program is available from the Advanced Planning System (APS)Administrator responsibility.

Data CollectionCollections: you can run collections in the following modes:• Full• Targeted• Net Change

Running or scheduling data collections is performed using Advanced PlanningSystem (APS) Administrator responsibility: Collections > Oracle Systems > DataCollection.

Initial Data Collection: you should run the initial data collection in Full Collectionmode, including collection of user-company associations (the setup of users in theUser form, including employees, supplier contacts and customer contacts). Theuser-company association will allow supplier personnel to connect to CollaborativePlanning after collection completes. Full collection will also transmit items whichhave an associated VMI enabled Approved Supplier List (ASL) into CollaborativePlanning.

Subsequent Data Collection:. After the initial collection of setup data, you can rundata collection in either Targeted Refresh or Net Change Refresh Mode by settingthe parameter ‘Purge Previously Collected Data to ‘No’. These methods refresh agiven set of data and can be scheduled to run as often as necessary. It isrecommended that Net Change Refresh be run regularly to collect data that changes


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frequently such as on hand quantities, reservations, purchase orders, and purchaserequisitions.

Note: targeted data collection allows you to collect a specific entity (e.g. delete all BOMs and re-collectall the BOMs); net refresh will collect only the new data and will not collect any existing data

Collection Performance: you can improve the performance of Targeted or NetChange Collections by selecting the fewest parameters for update. The minimumfor collecting changes in transactional data is PO and On Hand Quantities. If youare performing a Full Collection, you should generally include all collectionparameters.

Using Automatic ReplenishmentAutomatic replenishment refers to the ability to automatically propose quantities toreplenish based on calculations performed by the Collaborative Planningapplication. If you use automatic replenishment, you can simply choose the itemsyou want to replenish and select the Release button in the Collaborative PlanningVMI view. This release triggers the creation and entry of an approved requisition inpurchasing.

To use automatic replenishment, you select ‘Allow Automatic’ on the ApprovedSupplier List Attributes form located under the VMI tab. In order to release theproposed requisition, you must stipulate which party or parties should have theauthority to release requisitions from collaborative planning: • Supplier or Buyer: either party can release the proposed requisition by choosing

the release button in the Collaborative Planning VMI view• Buyer: only the buyer has the authority to release the proposed requisition by

choosing the release button• None: neither party is required to release the proposed requisition; rather the

release is performed automatically after the calculation of required quantitiescompletes

VMI Blanket Release ShipmentsYou must define and approve a blanket purchase agreement with your supplierbefore VMI requisitions from that supplier / site can be processed. The blanketagreement should include all the items that are subject to VMI procurement processwith that supplier. You may establish as many blanket agreements as you wish tosupport the VMI process.

Using Automatic ReleaseAutomatic Release refers to an automated process of sourcing requisitions onto avalid purchasing document in the Purchasing application.

You may choose to have VMI requisitions automatically placed onto BlanketReleases. There are two automatic release options on the Approved Supplier List(ASL):• Automatic Release: if you select this setting and have set the profile option PO:

Release during Reqimport to ‘yes’, blanket releases created by suppliers will beapproved automatically (without your review)


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• Automatic Release/Review: if you select this setting and you have set the profileoption PO: Release during Reqimport to ‘yes’, blanket releases created bysuppliers will require your review and approval

If, for either of the ASL automatic release options, you have set the PO: Releaseduring Reqimport profile option to ‘no’, then you must use the Create Releasesconcurrent program in order to generate releases for VMI.

If you have set the Automatic Creation Item attribute to ‘yes’ in the PO CreateDocument workflow, the ASL automatic release settings are disregarded andreleases are always generated automatically.

Registering Suppliers on Collaborative PlanningOracle Collaborative Planning allows your suppliers to access a secured view ofprocurement and inventory information. You need to give access to suppliers asusers of Collaborative Planning,

Establishing Suppliers as UsersSuppliers must be granted access to your system. To do this for CollaborativePlanning, you must define a user for each supplier who is granted access to thesystem. You do this using Oracle System Administrator Responsibility: Security >User > Define.

On the Users form, to define a supplier for Collaborative Planning, you should:• Assign a supplier contact (the supplier contact must be setup in the supplier site

form)• Assign e-mail address• Assign Collaboration Planning Responsibility

You should not, however, define a ‘person’ or internal company employee.

After you have defined the supplier, you must run Data Collection (any collectiontype) so that Collaborative Planning recognizes the supplier. The data collectionparameter ‘Trading Partner Supplier’ should be set to ‘Yes’ in order to register thesupplier.

Once data collection is complete, the supplier will have access to CollaborativePlanning via Supply Chain Collaboration Planner responsibility. The supplier canthen view on-hand stock, launch purchase requisitions in Oracle Applications whendesired, and track the progress of deliveries.


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Establishing a VMI Relationship with SuppliersThe VMI process can be used alongside any existing business practice you use toperform procurement and inventory management and can be initiated at any time.You can also suspend or terminate VMI at any time without time consuming or laborintensive system setup changes.

You enable a supplier-supplier-site-item-organization association for VMI byselecting the VMI enabled check box on the Approved Supplier List Attributes form.This setup validates all supplier-initiated requisitions to ensure that the supplier isallowed to perform tasks for this item in the designated ship-to organization. Whenthe VMI enabled checkbox is not set, the Approved Supplier List (ASL) is disabled,or the ASL status does not allow transactions, the supplier is forbidden from raisingpurchase documents on your behalf.

Note: You cannot select the VMI attribute for Asset Management, OSP, ATO or CTO items. Inaddition, Process Manufacturing and Warehouse Management organizations cannot be used in conjunctionwith VMI in Patch Set H.

User DefinitionForm


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Note: The VMI UOM field contains the unit of measure for the item in the organization that ‘owns’ theApproved Supplier List (ASL) entry. If the ASL is local, the unit of measure is the primary unit of measure inthe current inventory organization. If the ASL is global the primary unit of measure is determined by theorganization that owns the global entry. This field cannot be updated.

Once you have enabled the Approved Supplier List for VMI, you can enter details inthe VMI tab of the Approved Supplier List Attributes. These include the minimumor maximum (threshold) level of desired inventory and the method by which thesupplier will replenish materials.

ApprovedSupplier List

Attributes Form


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RequestGoods

Store &ConsumeMonitor Route &

Receive

Monitoring the Status of VMI Stock

VMI suppliers should monitor the status of on-hand and in-transit goods in order totrigger replenishment at the appropriate times. For this purpose, CollaborativePlanning presents information from Oracle Purchasing and Inventory Applicationsto the supplier. In addition, VMI suppliers will be notified when the availablesupply falls below the approved minimum.

Collecting ERP data for Collaborative PlanningIn order to begin using Collaborative Planning to present items, on hand quantities,in-transit and forecast information to selected suppliers, you must first collect allpertinent data from Oracle’s Inventory and Purchasing Applications. Schedulingdata collections performs this function.

Data collection should be run when you add or disable VMI Approved Supplier Listentries, supplier contact personnel, or make other changes to setup data in order tosee the new or updated information in Collaborative Planning . You must stopscheduled Net Change collections if you run a Targeted or Complete Refresh. Youcannot run multiple data collections into Collaborative Planning simultaneously.

Note: If you are using Advanced Supply Chain Planning , you are recommended to run full collectionsin order to capture all changes in Oracle Inventory and Purchasing Applications. This process cannot be runconcurrently with Net Change Collections taken for the purposes of refreshing VMI information. The systemwill process each of these requests in the order submitted.

Viewing On Hand Quantity DataSuppliers can view the balance of on hand quantities, forecasts based on expectedusage, in-transit stock transmitted using Advanced Supply Notices (ASNs),minimum and maximum stocking thresholds and the status of releases intoPurchasing. The supplier’s view is limited to the items for which they havereplenishment responsibility and to on-hand and in-transit quantities that theysupply. A supplier cannot view regular (internally replenished) stock or quantitiesof an item supplied by another supplier.

Note: Suppliers may view a forecast of expected usage for an item for a given forecast horizon. Forexample, the customer provides an order forecast to the supplier today for the next 10 weeks. During thisperiod, item consumption will be 14 units per week. This averages out to 2 units per day of average dailyusage. Based on this forecast, if the customer has 6 units on-hand, this translates to 3 days of inventory.


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Supply ChainExchange VMI

View


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RequestGoods


Receive

Request Goods

Suppliers may choose to use either Manual Replenishment or AutomaticReplenishment .

Using Manual ReplenishmentThe supplier may initiate a requisition via the Collaborative Planning order entryform at any time. Once entered and saved, this requisition will be imported as anapproved requisition using the Requisition Import concurrent program.

The manual replenishment method should be used when the supplier can bereasonably expected to make decisions about quantities and timing of deliveries tothe customer, or when supplying few items.

Using Automatic ReplenishmentAllowing automatic replenishment is advisable when you want the system topropose replenishment quantities through automatic calculation. You can use thesuggested replenishment quantities to release requisitions and import them intoPurchasing without manual monitoring and order creation. This may be appropriatewhen you have a significant number of items to maintain and you want to minimizethe amount of manual work required of the supplier.

You or your supplier can use automatic replenishment.. With automaticreplenishment, the system will automatically propose releases in order to reach theVMI maximum quantity, considering the time fence, existing Advances SupplyNotices (ASNs), requisitions, blanket release shipments and available stock in orderto arrive at the proposed replenishment quantity.

If you use automatic replenishment, you must run the VMI Replenishment Engineconcurrent program from the Advanced Planning System (APS) Administratorresponsibility. This program performs the release calculations and presents resultson Collaborative Planning .


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RequestGoods


Receive

Routing and Receiving VMI Stock Requisitions

Your Purchasing setup determines how supplier initiated requisitions are handledonce they have been imported from Collaborative Planning . You have the option ofplacing these requisitions into the requisition pool so that a purchasing agent canautomatically create the requisitions onto blanket purchase orders. You also havethe option of automating the entire VMI process so that your employees need notinvolve themselves in a task that has been charged to the supplier.

VMI RequisitionsWhen a supplier initiate a request for VMI items in Collaborative Planning,requisition lines are imported into Oracle Purchasing as approved requisitions usingthe Requisition Import concurrent program. A series of validations are performed inorder to ensure that the supplier has been granted permission to raise a requisitionfor the specified item and to deliver it to the desired ship-to organization. Youcannot manually create a VMI requisition from the PO Requisition form or generateone through an internal planning run, as a supplier alone is tasked with thisresponsibility. You can query VMI requisition lines in the Requisition Summaryform at any time.

RequisitionSummary Form


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VMI Blanket Release ShipmentsBlanket Purchase Agreements support both VMI and non-VMI release shipments.There is no need to separately define and maintain Blanket Agreements for itemsprocured by different procurement methods. Neither is there is a need toredundantly define items on your Blanket Agreements to segregate purchase orderlines according to procurement methodology. In this way, Oracle Purchasing allowsyou the flexibility of choosing a procurement method for any shipment.

Using the Autocreate FormIf you do not want to automatically create blanket releases from supplier VMIrequisitions or if no valid blanket agreement is available, use the PurchasingAutocreate form. Supplier VMI requisitions are placed into the requisition pool andmust be sourced, manually, to a blanket agreement using the Autocreate form. Thisis appropriate when you want your internal purchasing employee to source thesupplier’s requisition from a specific blanket agreement.

You can either create a blanket release or add VMI lines to an existing blanketrelease using the Autocreate form. In find requisitions window, you can select VMIrequisitions and build your purchasing documents in the same way you wouldperform this task for a non-VMI requisition.

Note: You can only source VMI requisition lines to valid Blanket Releases. The Sourcing informationon the requisition must match the Supplier and Supplier Site information on the Blanket Purchase Agreementto which the requisition is assigned.

Note: Grouping rules ensure that VMI lines are not summarized into a single release shipment line withnon-VMI lines. While VMI and non-VMI lines can coexist on a blanket release, they cannot be combined atthe shipment level.

Autocreate Form


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Viewing VMI Purchase Information

Receiving VMI ItemsReceiving VMI goods is performed in the same manner as internally replenishedstock items; there is no need to differentiate any items in receiving based upon theprocurement method used. VMI blanket release shipments carry a non-updatableattribute indicating that the release shipment is planned by the supplier and shouldthus be presented to the supplier using Collaborative Planning .

Whenever you perform a delivery transaction into Inventory for VMI, the SupplierSite is stored as the planning organization. This allows Inventory to quantify onhand and available stock for each supplier and to present this information toCollaborative Planning .

When you return VMI goods to the supplier, the original blanket release shipment isre-opened so that the supplier can furnish you with replacements. Procurement isalways aware of the method in which these goods were originally procured, since theshipment line contains the VMI attribute. The returned goods will be presented tothe user as ordered and on-hand inventory will be reduced (if the source of the returnwas Inventory).

You can correct receiving transactions involving VMI shipments without restriction.The Purchasing application always maintains the VMI attribute for shipments,regardless of the exceptions and corrections that take place during the receivingprocess.

Purchase OrderSummary Form


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RequestGoods


Receive

Storing and Consuming VMI Stock

Once you receive and deliver VMI stock into inventory, your supplier can continueto track the on-hand quantity of these goods until you move them into regular stockor consume them.

Commingling VMI and Regular Materials Because warehousing personnel are not necessarily interested in the VMI status ofmaterials when unpacking, counting, and moving goods in the warehouse, anessential requirement of VMI is to allow commingling of goods. Personnel must beable to place goods in a chosen locator; sub-inventory or other physical area of awarehouse without the need to separate them based on whether they constitute VMIor internally replenished stock. Oracle supports commingling of materials so thatyou can transact all goods in the same way. VMI stock can be identified in anyinventory location through on-line inquiry or by running the On Hand Quantities bySupplier Report.

MaterialWorkbench


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Using the Materials Workbench form, you can query VMI on hand quantities byindicating the Supplier and Supplier Site for your VMI supplier. If you do not entersupplier or supplier site in the Find form, you will see on hand quantities for bothinternally replenished stock and VMI stock (if they both exist in a given sub-inventory, lot, locator, or serial number).

Transacting VMI Materials Several new transactions allow you to transact VMI stock in Inventory: • PO Receipts into Stock {for VMI release shipments}: this transaction is

automatically created when you deliver goods into stock from receiving. Whena blanket release shipment is marked as a VMI shipment, the Supplier Site isnamed as the planning organization in inventory.

• Miscellaneous Receipts {naming supplier/supplier site}: this transaction allowsyou to enter a miscellaneous inventory receipt and name the supplierresponsible for planning. When you create a miscellaneous VMI receipt, thesupplier’s on-hand quantity is increased and the effect of the transaction can beseen in the supplier’s VMI view on Collaborative Planning after the next datacollections run.

• Miscellaneous Issues {naming supplier/supplier site}: this transaction allowsyou to enter a miscellaneous issue of goods from VMI stock, naming thesupplier and supplier site whose planned inventory should be reduced. Whenyou create a miscellaneous VMI Issue, the supplier’s on-hand quantity isdecreased and the effect of the transaction can be seen in the supplier’s VMIview on Collaborative Planning after the next data collections run.

• Planning Transfers: this transaction allows you to explicitly take planningresponsibility from the supplier when the supplier should no longer havevisibility to the quantity stipulated in the transaction. The transaction does notmove goods; it simply changes the planning organization from the supplier siteto the internal organization in which the goods are held. Once you perform aplanning transfer and run collection, your supplier can no longer see the quantitytransferred in the on hand quantity column.

MiscellaneousTransactions Form


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Consuming VMI Materials Consuming VMI materials requires no special actions on the part of the user. Allmaterials in inventory are consumed in the order in which they are received. Forexample, you use an item in a manufacturing process and the item is supplied bothby using VMI and by internally replenished stock transactions. When a back-flushtransaction is performed, materials are moved into WIP on a FIFO basis, and theVMI quantities moved are no longer considered on-hand supply replenished by theVMI supplier. Once transferred into WIP, materials are always considered plannedby the internal party. This principle applies to any movement of VMI materials: moved goods aretransferred into regular stock and are no longer visible as supplier on hand quantitiesvia Collaborative Planning. Any transfer back to the original location is maintainedand does not reinstate the VMI attribution of goods. VMI and Other Replenishment Strategies

This section describes the relationship between the VMI business process and othertraditional replenishment strategies. An enterprise may decide to procure an item by both VMI and ‘traditional’replenishment methods. In such a case, stock is replenished by one or moresuppliers under a VMI agreement and another part is replenished by the enterpriseitself, using a conventional procurement process controlled by one of the traditionalreplenishment strategies, including min-max planning, reorder point or MRP. Oracle’s e-Business Suite fully supports this business practice with a multi-dimension on hand model that allows you track you stock level by planningresponsibility. For instance, consider a scenario where a supplier S1 manages a


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quantity Q1 of a given item under a VMI agreement; at the same time, anothersupplier S2 manages a quantity Q2 of the same item also under a VMI agreementand the enterprise independently procures quantity Q3 of that same item. Themulti-dimension on hand model allows you to keep track of these three on handquantities separately and independently from their physical location. Each quantityon hand is identified by a planning organization that has the responsibility forreplenish it: in this case, S1 is the planning organization associated with Q1, S2 isthe planning organization associated with Q2 and the enterprise itself is the planningorganization associated with Q3. For the purpose of reviewing the relationship between VMI and traditionalreplenishment methods, including min-max planning, reorder point planning andMRP planning, VMI stock is where the planning organization is the supplier;‘internally replenished’ stock is where the planning organization is the enterprise.

MIN MAX Planning In Min-Max Planning, the enterprise aims at maintaining the quantity on hand of aparticular item between a lower (minimum) and a higher (maximum) specificationlimit as defined on the item definition for that organization. Conceptually, this is a process similar to VMI where a supplier maintains the VMIstock between the specified minimum and maximum quantities defined on theApproved Supplier List (ASL). In order for these two replenishment processes to coexist, they need to be completelyindependent from each other. Oracle’s e-Business Suite fully supports this scenario:• Inventory Min-Max Planning only considers the internally replenished stock and

excludes the VMI stock from its calculation• Suppliers only see the VMI stock that they are responsible for replenishing. In a Min-Max scenario, the following setup is recommended for the items:• Inventory Planning Method: set to Min-Max Planning• Planning Method: set to MRP Planned or MRP/DRP planned in order to enable

Data Collections to publish the item to Collaborative Planning and to allow theplanner to review the long term forecast on the Planner Workbench.

• Release Time Fence: set to Do Not Release (Kanban), the item is replenished byMin-Max Planning and the planner should not create additional releases.

• The Min-Max Quantities established for the Organization/Item orSubinventory/Item should not include quantities supplied under a VMIagreement. The VMI supplied quantities should be excluded from theenterprise’s Min-Max quantities. For example, you want to enforce a totalminimum = 100 and total maximum = 200 for item A., Item A is subject to VMIminimum and maximum specification limits of 25 and 50, respectively. Youshould set the minimum = 75 and maximum = 150 for the enterprise. Theenterprise’s minimum and maximum have been reduced by the VMI minimumand maximum specification limits.


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Reorder Point Planning Reorder Point Planning is used to decide when to order additional quantity in orderto avoid dipping into safety stock. You can use Reorder Point Planning inconjunction with VMI if you maintain your safety stock as ‘internally replenishedstock’ and you routinely consume the VMI stock replenished by one or moresuppliers. In order for these two replenishment processes to coexist, they need to be completelyindependent from each other. Oracle’s e-Business Suite fully supports this scenario:• Reorder Point Planning only considers the internally replenished stock and

excludes the VMI stock from its calculation• Suppliers only see the VMI stock that they are responsible for replenish. In this Reorder Point Planning scenario, the following setup is recommended for theitems:• Inventory Planning Method: set to reorder point in order to enable Reorder Point

Planning • Planning Method: set to MRP Planned or MRP/DRP planned in order to enable

Data Collections to publish the item to Collaborative Planning and to allow theplanner to review the long term forecast on the Planner Workbench.

• Release Time Fence: set to Do Not Release (Kanban), since the item isreplenished by Reorder Point Planning and the planner should not createadditional releases.

MRP PlanningThis section applies to both Oracle Material Requirement Planning (MRP) andOracle Advanced Supply Chain Planning (ASCP).

You can use MRP Planning to plan for your internally replenished stock while youdelegate the replenishment responsibility for the VMI stock to your supplier. In thiscase, however, MRP needs to balance the total demand against the total supply,including both the internally replenished stock and the VMI stock.

Consider a scenario in which you experience an unusual increase in customerproduct demand. This increase in demand has not been reflected in the minimumand maximum quantities established for the VMI supplier of an included component.Assume that the supplier keeps the VMI quantities within the desired range. In thissituation, MRP will suggest a requisition that should be supplied outside of the VMIarrangement, as the requirement is ‘pulled’ from the customer, not ‘pushed’ by thesupplier as part of VMI. A non-VMI order will be placed for the additionalquantities required to meet the increased demand.

Consider the same scenario, but in this case assume that the supplier has allowedquantities to fall below the desired minimum level. You run MRP, resulting in aproposed requisition for both non-VMI goods (from MRP) and VMI goods. It ispossible that both a non-VMI and a VMI replenishment transaction could arise forthe same demand. Reviewing can mitigate this risk and manually adjusting MRPrequested quantities to exclude those that the supplier will replenish using VMI.

Additional Information and Resources


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There are many sources of information pertaining to Oracle’s VMI solution,including online help, technical documentation, and user guides. These resourcesmay be found in:

• All Oracle application documentation is available online (HTML or PDF).

• In www.metalink.oracle.com, and includes technical documentation, userguides, white papers for:

1. Oracle Inventory2. Oracle Purchasing3. Oracle Collaborative Planning

Using Vendor Managed Inventory in Oracle Applications Release 11I June 2002Author: Greg ComlishContributing Authors: Paolo Juvara, Manish Patel, Margaret Guiliani, Paul Correa

This document is provided for informational purposesonly and the information herein is subject to changewithout notice. Please report any errors herein toOracle Corporation. Oracle Corporation does notprovide any warranties covering and specificallydisclaims any liability in connection with this document.

Oracle is a registered trademark of Oracle Corporation.

Oracle CorporationWorld Headquarters500 Oracle Parkway

Redwood Shores, CA 94065U.S.A.

Worldwide Inquiries:650.506.7000

Copyright © Oracle Corporation 2002All Rights ReservedPrinted in the U.S.A.

http://www.metalink.oracle.com/

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