Inventory replenishment arrangement whereby the supplier either monitors the customer’s inventory with own employees or receives stock information from the customer. The vendor then refills the stock automatically, without the customer initiating purchase orders. Collaborative Planning, Forecasting, and Replenishment (CPFR). Vendor managed inventory (VMI) arrangement in which both buyer and supplier share internal information to integrate their plans, forecasts, and delivery schedules to ensure a smooth flow of goods and services as they are needed.
Why globalization has generated increased interest in Vendor Managed Inventories
There are many reasons Companies have shifted to using Vendor Managed Inventories.
The reason for this increased interest is twofold. First, global supply chains are considerably more complex than domestic ones, and many companies that are new to global sourcing have elected to delegate this complexity to their suppliers instead of tackling it internally. Second, global supply chains involve longer transit times, which means carrying inventory for longer periods of time, and that’s time companies would prefer not to have on their books.
One of the many Companies on the market that offer Vendor Managed Inventory is CEVA Logistics. CEVA Logistics have the following to offer their clients. The VMI solution in CEVA Logistic is the transition to a new supply chain model entails a change in the physical flow of goods, replenishment processes and data transfer:
- Control of inbound supplies – Consolidation of inbound flows in one facility, strategically located and managed by CEVA.
- Automated replenishment process – CEVA manages the inbound hub, taking care of the most appropriate replenishment strategy for the manufacturer.
- Automated information exchange – One data source creating real time visibility to all partners providing inventory visibility throughout the supply chain.
- Vendor support – Managing the contractual relationship with the suppliers and providing support to ensure compliance according to manufacturer’s specification.
- Global trading – Helping the manufacturer to achieve substantial cost savings on a wide range of non-core goods and providing services to reduce costs on trading.
Describe the benefits that can be gained by entering into a VMI arrangement. Listed below are a few of the benefits offered by many VMI Companies.
- Negotiate, agree and maintain contracts with suppliers. Agree and maintain stock levels for all parts. Perform customer service and invoice services.
- Continuous control of supplier’s stock and take action report on any deficiencies including full incident and claims management.
- Providing visibility in inventory throughout the supply chain and on the material moves and activities in the VMI hub including KPI reports.
- Delivering the most appropriate replenishment strategy with suppliers. Handling and managing all orders from suppliers and manufacturers.
- Planning and execution of materials receiving and storage. Planning and execution of FIFO pick, pack and ship materials to production lines.
- Customize activities for each supplier’s stock having full compliance with the manufacturer’s requirements like re-palletize, rework, deconsolidations, screening, etc.
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