vendor managed inventory how to get the best results
TRANSCRIPT
VENDOR MANAGEDVENDOR MANAGEDINVENTORYINVENTORY
How to Get the BestHow to Get the Best
ResultsResults
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AgendaAgenda
What Is Vendor-Managed What Is Vendor-Managed Inventory (VMI)Inventory (VMI)
ObjectivesObjectives
Working CasesWorking Cases
PreparationPreparation
Information Systems IssuesInformation Systems Issues
Assessment and AgreementAssessment and Agreement
MeasurementsMeasurements
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What Is Vendor-Managed Inventory?What Is Vendor-Managed Inventory?
Choose the correct answer:Choose the correct answer:
1.1. Optimizes supply chain performanceOptimizes supply chain performance
2.2. Supplier has access to customer’s inventory Supplier has access to customer’s inventory datadata
3.3. Supplier is responsible for maintaining the Supplier is responsible for maintaining the inventory level required by the customerinventory level required by the customer
4.4. The process is to resupply inventory by the The process is to resupply inventory by the vendor via scheduled reviewsvendor via scheduled reviews
5.5. All of the above All of the above
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Vendor-Managed InventoriesVendor-Managed InventoriesIt has been an It has been an evolution:evolution:– Stock replenishmentStock replenishment
RetailRetail– ConsignmentConsignment– Systems contractsSystems contracts
Standard Standard materialsmaterials
– Scrutinized Scrutinized inventoryinventory
CustomerB
CustomerC
CustomerA
Vendor
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ObjectivesObjectivesCustomerCustomer– Reduced inventoryReduced inventory– Reduced operating Reduced operating
costscosts– Total cost reducedTotal cost reduced
Purchasing and Purchasing and administrative costsadministrative costs
Fewer suppliersFewer suppliers– IntangiblesIntangibles
Shorter cycle timeShorter cycle time
Greater customer Greater customer satisfactionsatisfaction
SupplierSupplier– Increased volumeIncreased volume– Forces disciplinesForces disciplines
MeasurementsMeasurements
CommunicationCommunication– Better planning and Better planning and
resource useresource use
Visibility via Visibility via information sharinginformation sharing
– Need to eliminate or Need to eliminate or reduce non-value-reduce non-value-added activitiesadded activities
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Working CasesWorking CasesRetailRetail– CorningCorning– Wal-Mart (Quick Response Wal-Mart (Quick Response
Program)Program)
IndustrialIndustrial– Bose (unique planning)Bose (unique planning)– Rohm-Haas (MRO)Rohm-Haas (MRO)– Shamrock Supply Shamrock Supply
(integrator)(integrator)– Shell (unique)Shell (unique)– Contract ManufacturingContract Manufacturing
(various)(various)
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Preparation: Questions for Preparation: Questions for Selecting MaterialsSelecting Materials
What are your intentions?What are your intentions?– Reduce workload to concentrate on $$$Reduce workload to concentrate on $$$
What are the critical materials/processes?What are the critical materials/processes?– Need consistency and reliabilityNeed consistency and reliability
Requires closer cooperationRequires closer cooperation
Which items/commodities have attributed to the Which items/commodities have attributed to the greatest delays?greatest delays?
What is important to your company?What is important to your company?
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Operational PracticeOperational PracticeConsiderationsConsiderations
Warehousing AlternativesWarehousing Alternatives– Supplier managedSupplier managed
Automatic replenishment (owned or managed)Automatic replenishment (owned or managed)– Best for reasonable degree of predictabilityBest for reasonable degree of predictability– Appropriate directly to point of useAppropriate directly to point of use– Two-bin or eyeball control levels – periodicTwo-bin or eyeball control levels – periodic
Managed on customer siteManaged on customer site– Supplier personnel work as planners on customer Supplier personnel work as planners on customer
behalfbehalf– Works best when customer has a “wide line card”Works best when customer has a “wide line card”– Utilizes customers planning/replenishment systemUtilizes customers planning/replenishment system
BE AWARE OF DATA ACCURACY/MANAGEMENT!!BE AWARE OF DATA ACCURACY/MANAGEMENT!!
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Information SystemsInformation SystemsManagementManagement
Sharing Sharing informationinformation– How good are forecasts?How good are forecasts?
Typically poorTypically poor
So what do you do?So what do you do?– Establish a “baseline”Establish a “baseline”
What do we plan for?What do we plan for?– Need to reviewNeed to review
Who takes the lead?Who takes the lead?
How often is this done?How often is this done?– When does this go away?When does this go away?
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Information SystemsInformation Systems(continued)(continued)
Reliability of dataReliability of data– Control of activitiesControl of activities
How well do we know How well do we know what’s happening in our what’s happening in our processes?processes?
– Procedures, flows, Procedures, flows, people deploymentpeople deployment
Are we achieving what Are we achieving what is intended?is intended?
– Measurements of Measurements of key areaskey areas
On-hand On-hand inventoryinventoryStock outsStock outs Aging Aging
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AssessmentAssessmentProcess statusProcess status– Under control?Under control?– Remember the Remember the
pitfallspitfallsRecord reliabilityRecord reliability
Information sharingInformation sharing
Lacking skill setsLacking skill sets
– What are the What are the results?results?
– What are the What are the corrective actions?corrective actions?
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Creating an AgreementCreating an AgreementCritical factorsCritical factors– Identify the itemsIdentify the items– Define the points of Define the points of
operational responsibilityoperational responsibility
Storage, persons, Storage, persons, quality, returns, etc..quality, returns, etc..
Identify and monitor Identify and monitor costscosts
– Develop service level Develop service level measures and note reports measures and note reports to be usedto be used
What are the What are the corrective action steps corrective action steps and timing?and timing?
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AgreementAgreement(continued)(continued)
Factors Factors (continued)(continued)– Specify price escalators Specify price escalators
and de-escalator and de-escalator processesprocesses
Price changes Price changes related to business related to business conditionsconditions
– Reference procedures Reference procedures to be usedto be used
– Timing/durationTiming/duration– Periodic auditsPeriodic audits– Termination clause Termination clause
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Performance MeasurementsPerformance Measurements
How to ensure VMI will enhance the How to ensure VMI will enhance the business?business?– Establish measures – identify the goalEstablish measures – identify the goal
Starting number of items vs. potentialStarting number of items vs. potential
Inventory $ initially vs. potentialInventory $ initially vs. potential
Total inventory $ at start, during, and afterTotal inventory $ at start, during, and after– Respective inventory turns and days of supply Respective inventory turns and days of supply
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MeasurementsMeasurements(continued)(continued)
Operational improvementsOperational improvements– InternalInternal
The number of stock outs and durationThe number of stock outs and duration
Cost of material/service before and afterCost of material/service before and after
– ExternalExternalCustomer satisfactionCustomer satisfaction
– Improvement of delivery availabilityImprovement of delivery availability– Other points as defined by the partiesOther points as defined by the parties
Competitive advantage considerationsCompetitive advantage considerations
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What’s Next?What’s Next?SuccessSuccess– Three “Es”Three “Es”
ExecutionExecutionEnergyEnergyExcitementExcitement
– Pilot then expandPilot then expandSuccess breeds desireSuccess breeds desire
– Measure and adjustMeasure and adjust
THERE ISN’T ANY THERE ISN’T ANY LUCK, JUST THE LUCK, JUST THE OPPORTUNITY TO OPPORTUNITY TO SUCCEEDSUCCEED