Research On The Consignment Stock And Vendor Managed Inventory In Manufacturing

More than50%of total manufacturing cost comes from the procurement process.In order to cut down cost, many companies are using supply chain cooperation methods,such as the Vendor Managed Inventory (VMI), Consignment Stock (CS), etc. But notevery company could realize its purpose by using CS or VMI. The reason comes fromtwo sides. Firstly, from the theoretical point of view, there is no enough comparisonresearch on the different procurement and inventory management methods, especiallyfor manufacturing parts. Secondly, in the implementation process of VMI or CS, thereare lots of problems like credit period, warehouse pricing and warehouse spaceutilization, which hinder the companies to practice these methods.Thereafter based on the cooperation with large manufacturing companies, the keyparameters which affect CS and VMI cost for parts procurement management will beanalyzed, thus the selection of right cooperation mode for different supply chain roleplayers would be determined. Supply chain model will be analyzed to compare differentcosts after utilizing traditional, CS and VMI inventory methods. Centralized anddecentralized methodologies are used to minimize the supply chain cost and solved theoptimal quantity and distribution frequency. Then numerical examples are analyzed toshow when to choose CS and VMI under different parameter ranges.Based on the basic research above, the problems during the implementationprocess, such as credit period, warehouse pricing and warehouse space utilization willbe studied. New form of credit period applied to CS and VMI will be added into thesupply chain models in order to inspire the transformation of CS to VMI. Numericalexamples show how VMI with credit period can reduce suppliers’, buyers’ and thewhole supply chain’s cost. Specific value of credit period is provided for suppliers andbuyers for reference in future negotiations.