Replenishment Control according to the VMI principle
Efficient replenishment control mapped directly in SAP
A supplier-managed replenishment has many advantages, especially for its customer. The supplier not only assumes responsibility, but must also ensure the necessary transparency and efficiency. To meet this complex requirement, one cannot do without supporting IT solutions.
Replenishment management by the supplier
Vendor Managed Inventory (VMI) is a logistics concept for improving performance in the supply chain, in which the supplier has access to the customer's inventory and demand data. In the form of so-called consignment inventory, the supplier maintains a consignment warehouse at the customer's premises from which customer requirements are covered. The warehouse is usually located close to the customer or on the customer's premises.
The goods remain in the possession of the supplier until they are withdrawn and paid for by the customer. Responsibility for the supply of goods - i.e. inventory management and replenishment planning - is transferred to the supplier or also to an external service agent (ESA). VMI is particularly suitable for goods that have high consumption and/or high consumption value.
For the customer, VMI increases availability, preserves liquidity, saves storage costs and shortens delivery times. The supplier strengthens long-term customer loyalty with its customized delivery service.
The higher risk with VMI is borne by the supplier. This is because he is responsible for providing his customer with the desired material in the desired quantity at the desired time. If he does not do this satisfactorily, this can disrupt the relationship with the customer or even lead to termination of the contract. Poor planning can also result in excess inventory, which has financial disadvantages.
Prerequisites for efficient VMI delivery processes
The IT-side mapping of VMI processes is not trivial. The supplier always needs accurate information about:
For the VMI concept to work for both sides, the following prerequisites are important: