Vendor-Managed Inventory (VMI)
The aim of vendor-managed inventory (VMI) is to integrate key customers in supply chain planning. The customer regularly sends stock and sales data to the vendor, and based on that information, the vendor determines replenishment requirements for the customer.
It is particularly advisable to implement VMI in the following circumstances:
Key customers constitute a high percentage of the vendor's sales figures. This applies, for instance, to producers of consumer goods that supply large retailers.
The products are standardized and requested repeatedly.
Product growth is not excessive, that is, the requirement patterns are stable and you can assume that requirements do not occur spontaneously. You can use a collaborative planning, forecasting, and replenishment (CPFR) scenario to map sporadic requirements (caused by promotions, for instance) and integrate these in VMI.
The transaction costs for order processing and production planning are high.
Vendor-managed inventory allows vendors to perform replenishment planning on behalf of their customers. It improves the vendor's access to the actual customer requirements, and also enables the vendor to make informed decisions about how to distribute goods for different customers. This ensures improved customer service, lower transportation costs, less inventory, and lower sales costs.
In SAP Supply Chain Management, VMI can take any of the following forms:
Standard, non-consigned VMI process
For more information, see Standard VMI.
Consigned VMI process
For more information, see Consignment VMI.
Parallel consigned and non-consigned scenario
For more information, see Shipment Split in the VMI Scenario.