Industrial Engineering

Are You Ready for VMI?

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Picture source: http://portalvmi.com.br/
INDUSTRIAL ENGINEER – VOLUME 43, NUMBER 2
BY TARIKERE T. NIRANJAN, STEPHAN M. WAGNER AND BUBLU THAKUR-WEIGOLD

Vendor Managed Inventory (VMI) is one of supply chain model on how supplier decides the optimal inventory level of each product. The benefit of using VMI is the raw material inventory can be reduced because supplier is the one who control the raw material quantity and delivery schedule so that the production process and inventory level can be managed to become better one.

Supply chain information such as the amount of demand, will show a wave that usually called Bullwhip Effect. The purpose of this VMI model is by reducing the wave’s surge. The smaller the surge, the supply chain will be easier to be controlled.

For knowing whether a company is ready or fitted with VMI is by collecting data in the company such as data in production sector and logistic sector. The data collected will be acquired by using questionnaire paper. For the result, the company who achieve score more than 300 is ready or fitted for using VMI or at least had been applied the method. If the score in range of 200 to 300 that means the VMI model is expected to be applied for increasing the company’s performance.

These are results of VMI consideration in four companies:

  1. RUAG Aerospace is suggested not to apply VMI. This company is working on aerospace ship where the constructing process focuses on one part only. On the other hand, the material requirement needed is not quite many which makes the supply chain is no longer necessary.
  2. ODLO Company has been using VMI but some problems will occur for instance too many product models and data in production process which makes supplier cannot organize well.
  3. Novartis Company who runs on the pharmacy area, VMI is well accepted for the help of the technology and the supply chain strategy which happen to reduce Novartis’ inventory cost.
  4. Procter & Gamble or well known as P&G has applied VMI successfully. P&G happen to do some optimization in the production by comparing to the sales. This company also has a good relation with the retailers by managing the supply chain process efficiently.

VMI cannot be applied in every company. Everything is depending on the company policy itself, for example the supply chain management and the production planning.

By:

Andresen (1601255485)
Ignasius Rian (1601216036)
William (1601257212)