A Study On Vendor Managed Inventory In Supply Chain

The globalization of the world economy and intensifying global businesscompetition has created the high volatility and uncertainty of today’s business world.Thus, modern method of supply chain management has become a very important toolfor companies to gain competitive advantages over competitors. Nowadays totalsupply chain versus total supply chain competition has replaced the scenario ofinter-company contests, which requests modern companies to consider managementproblems from SCM (Supply Chain Management) perspective, for circumstances,SCM inventory management, which has significant impacts on productions, salesactivities and financial results for a company. Under this background and followingthe trend, a new supply chain inventory management model: Vendor ManagedInventory (VMI) has been put forward. By reviewing and analyzing the literatures ofSCM inventory control, problems and challenges existing in traditional inventorycontrol models, this paper has presented a new model of inventory management,which aligns with the current SCM environment, that is, Vendor Managed Inventory.Under VMI model, instead of the buyer enterprise itself, the supplier steps up to bethe one who replenishes, manages and controls all the stock that the buyer purchasesfrom him, basing on the business information shared by buyer enterprise includingreal-time stock level, production plans, sales forecast etc., to ensure fast and efficientresponse to the fluctuation and variation of the market needs, so that thepredetermined service level are surely maintained. With information sharing in a moretimely manner, more accurate forecasts and more updated production schedule, thebullwhip effect can be greatly weakened, consequently the total stock level as well asthe total cost in the whole supply chain can be heavily reduced, which ultimatelycontributes to the enhancement of the company’s competence of the supply chain.Based on the literature reviews including theories of SCM and traditionalinventory control methods, this paper has a thorough exposition about the motivesthat drives VMI come into being, the in-depth meaning, the methodologies, theprocesses and principles of VMI, the role of VMI in mitigating bullwhip effect andimproving the flexibility of supply chain as well as reducing logistics costs, etc..Wealso have a systematic analysis on the optimization of the processes and applicationpractices of VMI. Additionally, a case study on company S has been followed up. Anin-depth research has been done on the VMI implementation project of company S byapplication of theories and methodologies of VMI. By exposition and illustration ofthe processes and strategies of company S, this paper has a qualitative andquantitative analysis of the performance of this project, based on which the author hascome up with some findings by this project. By presenting the overall implementationmethodologies of VMI and exposition of VMI implementation in a global andmatured business corporation, this paper would like to enlighten and contribute theknowledge to China domestic manufacturers who have a willing of migrating theirinventory management performances and total supply chain performance to a newlevel by implementing VMI.