Fast Moving Consumer Goods Industry The Effective Realization Of The Method Of The Vmi System

Distribution management is one important component of supply chain collaboration system. In order to study and manage the uncertainty in distribution channel of FMCG, the first step is to fully understand the characteristic of FMCG product and the concomitant challenge to distribution management. The effective method to manage the complexity and variability of distribution channel is to make the status of stock transparent in the whole channel and adopt the strategy 'to replace stock cost by information investment, to improve efficiency of supply chain by new technology.'Stock management, the core of supply chain management, intends to balance the stock holding cost and customer service level. Although stock replenishment point depends on on-time delivery rate, the accuracy of daily sales forecast is the most critical factor of stock management.Accuracy of daily sales forecast is distorted by inherent 'Bullwhip effect' in supply chain, which refers to the tendency of orders to increase in variation as one move up a supply chain. For variables to demand in manufactory is bigger than the one in distributor, the demand fluctuation in marketing will be accelerating magnified when it finally arrives at manufactory upriver. In order to reduce the uncertainty of demand, each partner in supply chain trends to prepare safety stock, and such behavior multiplies overstock and occupies working capital in the whole supply chain. The variation of demand in channel relies on level of distribution network and decision-independence of each partner. Much more sales levels of network and independency of decision, more uncertainty of demand exists in distribution channel. Therefore, good method to manage 'Bullwhip effect' is to reduce sales level, share sales forecasting information across supply chain and make decision transparent among the partners.Vendor managed inventory (VMI) is one of the management technologies based on information sharing. This new technology has been widely adopted abroad in FMCG's distribution channel, especially the continuous stock replenishment plan between manufactory and distributors. Due to the characteristic of sales distribution in domestic, we still stay in the researching and learning stage of VMI implementation. There are some general issues of VMI implementation in FMCG: VMI running cost, stock ownership, cooperation and partnership based on mutual-trust, the reconciliation of rights and duties. The pre-requisition of VMI implementation is to build up six platforms: information and communication technology, standard management process, commercial cooperation based on mutual-trust, perfect logistics system, risk controlling system, consensus on VMI benefits and its concept. These six platforms work together to ensure the success in VMI implementation.This paper studies VMI implementation strategy at three aspects: solution to collect the sales information from distribution channel, VMI stock replenishment model, business intelligence of sales distribution management. These three parts of VMI implementation (at the level of collection, application and presentation respectively) works together to translate the high quality data into business knowledge, and to provide a good tool to monitor and manage uncertainty of demand across supply chain.