Vendor Managed Inventory


Logistics: Training and Technologies

For businesses, shorten product lifecycles and minimize inventory investments, increase turns and drive efficiency becomes their logistic objectives. These objectives have been achieved in this paper by a review of the trainings and technological issues involving a 3rd party logistics such as the implementation of Vendor-Managed-Inventory (VMI). Basically, reducing inventory by synchronizing the movement of goods and information between the company and suppliers and partners at the supply chain via Vendor-Managed-Inventory (VMI), the resource of 3PL can help the company more competitive. By more effective management of the interface between processes, along with themselves, most organizations have to achieve significant inventory reduction, improved service and communication, and enhanced delivery and response time for the entire supply chains.

In the current's speedy and hi-tech modern world, the test that the business faces is that putting stuff in order and develops the best and most efficient way in business. Life has changed since the development of the computer which dictated man to contract with things in the most competent way feasible. In the world of big international trade where transactions and other business operations are governed by law, cultural differences and mutual trust, effectiveness counts largely as a universal entrepreneurial aim.

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The logistics industry is confronted with challenges that address speed and a reliable delivery system of the company as business operations essentials to compete competitively in today's global trade business highlighting the value and importance of time. Accountability in terms of service deliveries define the success and competitive advantage of companies in the express industry in which the leading trading firms strategically manage time in their supply chains (Kostecki, 1996). In this light, dealing effectively with customs and putting pressure to encourage rational and efficient customs operations is an integral part of managerial skills of time management in major trading firms as problems of inefficiencies and irregularities in functioning of customs in different territories significantly influences the trading environment where just-in-time supplies, electronic trading and increased internationalization govern the current trend in the express industry (Ahanori & Nachum, 2000).

Altabet (1998) states that, “the latest emphasis of forecasting has been in the areas of scheduling and logistics, renamed ‘Supply Chain Management'”. Another article says, “Forecast horizons can impact a host of functional areas in the supply chain&lrquo; (Saran, 1998). An accurate sales forecast can have numerous advantageous results in the process of SCM. Effective forecasts will provide the company with more accurate data, improve efficiencies in product distribution, reduce supply chain inventories, and enhance customer service (Kiely, 1999). In general, forecasting helps businesses serve their customers more efficiently, without the constant fear of excess inventory. The company must also be able to determine the concept of Cost Management as an important strategic weapon for a business. External purchases of products and services account for more than 50 percent of total costs (Degraeve & Roodhooft, 1999). Without sacrificing quality, services must create a reliable, cost effective supply chain or operational system to be competitive in the marketplace. Technology has increased the reliability of cost management systems through the use of computer packages designed for specific companies (Anderson & Katz, 1998).

Whether the international transaction is importation or exportation, contracts play vital role international trading practices. Vendor management Inventory (VMI) answers to the demands of international business operations in providing smooth business operations between the manufacturers and the suppliers (Waller et al, 1999 and Fox, 1996). The shifting nature of the supply management responsibility, from the manufacturer to the supplier, that this project tried to amend, offers practical advantages from which both parties will benefit as this shipment program takes into great consideration the usual constraints of time and cost that beset every product business organization (Ross, 2003). In the applying the VMI project, the supplier takes the responsibility of providing the inventories of materials and order fulfilment as well as the disposal and redistribution of excess materials from the manufacturer in accounting the supplies for production (Ross, 2003). This inventory management project provides flexibility in distributing the demanded materials and equipment while keeping in mind the value of lowered cost and effective time management in meeting the quotas and deadlines of orders that the producers are normally confronted with (Williams, 1998; Waller et al, 1999).

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As part of the training in business world, logistic practitioners must consider the routes. There are four strategic routes that should be realized for the successful implementation of the vendor management inventory. These include (1) materials consignment at factories, (2) materials consignment at bonded warehouses, (3) materials vendor management inventory in bonded warehouses, and (4) extension of vendor management inventory in the supply chain (Williams, 1998 and Waller et al, 1999). Bonded warehouses are established upon the approval of the customs for exclusive keeping of bonded goods and other products that have not yet gone through the clearance of customs. All imported and exported goods in the bonded warehouse, whether they are raw materials or spare parts, are exempted from import and export quotas, license control and taxes (Anily & Federgruen, 1990; Ross, 1996).

As the central distribution centre of the imported and exported goods between the suppliers and the manufacturers, the bonded warehouse plays the important role of efficient allocation of resources so as to counter the problems that may come out in the flow of supply and demand from the producers and consumers of the products such as delayed or changes deliveries and the additional cost that such shortcomings acquire (Anily & Federgruen, 1990). These bonded warehouses can answer to distribution and timely flow of the exchange of goods such as order re-allocations, material shortages and unfit-for-use raw materials and products in a particular facility (Burns et al, 1985). If bonded warehouses are available, unexpected difficulties in the storage, supply and exchange of raw materials and finished products between businesses will be kept at minimum frequency of occurrence (Anily & Federgruen, 1990). These warehouses will also be the most important venue of the implementation of VMI.

In the implementation of Vendor Managed Inventory, the suppliers will manage and replenish inventories by keeping a buffer stock according to actual material demand of the producing company while maintaining sufficient materials that can be stored in factories (Anily & Federgruen, 1990). The excessive materials that were incurred will be returned to the suppliers for re-sale or the manufacturing company will assist them in redistributing the materials to their other customers. In effect, there will be reduced material shortage and lead time delivery to factories in processing the production (Chen et al, 2000 and Williams, 1998). As such, there are several advantages in the proper implementation of VMI that a manufacturing company may take advantage of. These include reduced inventory, reduced material shortage, custom contract balance and synchronized demand and supply among transacting business establishments (Waller et al, 1999).