It is no more the problem of distributors or retailers to ensure
adequate inventory or minimize stock-out situations,
in their own locations. Now, the inventory manager is the vendor or supplier
himself. Globally, firms have recognized the importance of efficiently
managing their response to customers, i.e., Efficient Customer Response
(ECR). This notion has forced several manufacturers, and retailers to insist
on their immediate suppliers to assume the responsibility of
managing inventory and execution of purchase
orders on their behalf. Vendors too are displaying a keen interest to
assume such responsibility as they find it a better way to either insure or
optimize their sales. This philosophy of B2B relationships to realize
mutual benefits has placed the vendor in the new role, leading to the concept
of Vendor Managed Inventory (VMI).
While VMI relationships are mostly confined between component
vendors and the Original Equipment Manufacturers (OEMs), the need to
adopt the VMI practice has extended to both up and downstream of the value
chain. At present, VMI is predominantly practiced across the supply chain
to ensure Efficient Customer Response (ECR). In view of contemporary
supply chain practices, such as Just-In-Time (JIT), Make-to-Order, etc.,
the need for resilience across the upstream supply chain emerged.
Consequently, the need for collaborative partnerships between the
vendors and manufacturers to forecast, plan and replenish inventory has
arisen. This phenomenon cascaded across the upstream of the supply chain. To
co-manage the process, seamless visibility into their immediate
customer's inventory is required. Very often, these partnerships have forced the
respective vendors to take up the responsibility of managing the
inventory of their immediate customers. Later, VMI adoption also geared up
in the downstream supply chain, where sales are unpredictable, demand
variability is very high, re-sellers have budget constraints and where
manufacturers want to minimize missed sales opportunities. |
