During the last session, we discussed the procurement process for a Vendor-Managed Inventory (VMI) by using the Safeway example. The concept was initially initiated by Walmart and it’s supplier Protect & Gamble back in the 80s to provide 4 main advantages for the suppliers:
- Improved customer service
- Reduced demand uncertainty
- Reduced inventory requirements: By knowing exactly how much inventory the customer is carrying, a supplier’s own inventory requirements are reduced since the need for excess stock to buffer against uncertainty is reduced or eliminated.
- Reduced costs: To mitigate the up-front costs that VMI demands, Fox suggests that manufacturers reduce costs by re-engineering and merging their order fulfillment and Distribution Center replenishment activities.
Source: Mary Lou Fox
Meanwhile, vendor managed inventory (VMI) has evolved as both technology has advanced and as business processes have improved. Therefore, to meet this evolution the ERP system needed to integrate VMI into the general enterprise architecture.
The US patent 20040162768 A1 was one of the first solutions to elaborate an effective implementation of VDI processes into a shared portion of ERP between the customer and the supplier.
You can find here the Patent document. It’s a little bit long (remember that it’s a legal document, so it has to) but very clear. And let’s face it, we don’t spend time reading patents, so it could be your first time doing it. Happy reading experience.