Previous

Part - IV

The implementation of this model is very simple and requires minimal integration efforts by the buying organization as well as the Supplier or vendor. The simple way to explain the above concept could be, to consider one supplier and a customer. In this model the supplier sends one person from his side to the customer's premises, to count the inventory on the shelf in order to draw a picture about the usage value and the replenishment decisions. This model has some limitations regarding the total supply chain benefits. This process shifts responsibilities regarding the inventory management, so customer gets benefit out of these initiatives but the whole supply chain remains the same because whatever the load earlier was on customer gets transferred to the supplier. The consequences of this process regarding the cost could be either the cost are transferred back to the buying organization or it resulted in to In this process the cost are ultimately transferred back to the buying organization or eats away the operating profits of the supplier.

Joint Planning Model

A Collaborative Planning model consists of two stages. First stage consists of data sharing, and the second stage takes care of the forecasts and production schedules which are jointly developed amongst supplier chain partners. This collaborative process takes place at the item level, which is nothing, but the tactical level. The 'buyer' collaborates with the supplier on demand/consumption plans in order to develop an agreed upon consensus forecast of future demand that both companies will use to drive their business.

Fully Automated Replenishment Model

The earlier discussed two models show some limitations. A Fully Automated replenishment model combines the positives from the above two models. This model aims at reducing Total Supply Chain Cost not only at replenished site but also at the supplier's premise. This VMI model works at two levels.

One level is the Macro Level and another one is at the Micro Level. At the Macro level it defines the objective and the limitations of the relationships. The Objective of any organization, as stated earlier, is to improve the service level, inventory turns. At micro level, it develops the replenishment strategy for each SKU. Once the replenishment strategy is developed, the daily demand and the inventory level at the replenished site are closely monitored and the replenishment strategy is executed based on that. The diagram below describes the four stages of the Fully Automated VMI model.

Next

* Contributed by -
Sarang Aparajit,
PGDIE Class of 2005,
NITIE, Mumbai.