Knowledge Zone - Operations



Demystifying VMI: Vendor Managed Inventory

- by Sarang Aparajit *

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Part - VIII

Non-enabled Supply Chain VMI enabled Supply Chain
  • The arrow shows that at each point the POS data is collected.
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  • The entire Supply Chain gets the visibility about the Point of Sales data.
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  • The data is Faxed or emailed upstream in a sequence.
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  • The inventory Turns increases and a cycle time reduces.
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  • The orders are prepped, shipped, stored at each point.
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  • At each of the node the inventory level reduces.
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  • The allocations are made for downstream fulfillment.
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  • The forecasting accuracy increases.
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    Drawbacks of VMI

    The Vendor Managed Inventory, also called as VMI has another abbreviation .It is also called as Very Mixed Impact. The proper implementation of VMI is very important otherwise it can show wrong picture.

    Some of the Drawbacks of VMI include: -

    • The Retailers and consumer goods firms are reluctant to share information. This often proves to be a biggest obstacle in implementing VMI.

    • It focuses only on replenishment activity.

    • The Software professionals have not built an interface between the VMI and ERP system so generally they work apart so the manufacturer finds it difficult to integrate replenishment system with ERP.

    • Electronic Data Interchange used, differ from company to company so it makes the information translation and communication a difficult task.

    • It assumes fixed reorder points to trigger replenishment.

    • It often transfers the inventory ownership rather than reducing it.

    • It shows its inability to overcome inter-organizational barriers.

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