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SBS recently conducted a survey to better understand the motivation behind the purchasing decision. Not surprisingly, respondents indicated that cost, lead time and quality were the 3 driving motivations. VMI capabilities ranked a distant 6th. But, VMI helps manage and reduce costs, lead times and quality issues. So shouldn't it be the driving force behind selecting a supplier?
Citation preview
Vendor Managed Inventory: A tool for streamlining inventory management
A collaborative approach to supplier/customer relationships
Table of Contents § Purpose of this book
§ What is VMI
§ The need for VMI
§ Benefits
§ Implementation
§ Case Study: The Problem, Solution and Results
§ Conclusion
§ Contact Us
Purpose of this eBook
SBS recently conducted a survey to better understand the motivation behind the purchasing decision. Not surprisingly, respondents indicated that cost, lead time and quality were the 3 driving motivations. VMI capabilities ranked a distant 6th. But, VMI helps manage and reduce costs, lead times and quality issues.
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The Driving Force for Selecting a Supplier
VMI should be the driving force for
selecting a supplier
What is VMI? Vendor managed inventory (VMI) is a means of optimizing supply chain performance by having the supplier be responsible for maintaining the customer’s inventory levels, by relying on a demand-driven replenishment model.
“As a rule of thumb, 50 percent of your total items that account for only 10-20% of your inventory cost are candidates for VMI services.”
The Need for VMI
VMI programs are implemented in order to streamline inventory management, improve the purchasing process for c-commodities, increase customer service levels and create collaborative partnerships with suppliers.
“The increased globalization of supply chain operations and the risks and
pressures associated with the global economic environment has had a significant impact on the need for
inventory visibility and efficiency, and has fueled interest in VMI.”
-AMR Research
If not VMI, than what? For manufacturers that do not employ a VMI program, inventory shortages, quality issues, excessive purchase orders and excess inventory continue to plague the manufacturing environment.
*as found in a survey conducted by SBS
Benefits of VMI
Under the SBS VMI model, the OEM no longer
needs to monitor its production
forecasts in order to trigger replenishment
orders, SBS assumes
responsibility.
¡ Direct connection between point of use and the supplier reduces stock-outs and downtime
¡ You only take the product you need, when you need it, to meet production demands
¡ Inventory levels are reduced throughout the entire supply chain at the customer, supplier, and at the upstream manufacturer
¡ Reduced costs through reduced management and on-hand inventory
¡ Expediting and cancellations are eliminated
¡ The number of purchase order is decreased by 95%
Who can resist?
With VMI, the roles, skills, trust and
power shifts, often resulting in resistance during the
implementation phase
QUESTIONS:
¡ If I no longer control it, will it work?
¡ Will VMI function well? Who is to blame if it doesn’t?
¡ Will I run out of product?
¡ If someone else does this for me, what will I do?
ANSWERS:
The right VMI supplier will help you control costs, maintain proper inventory levels, eliminate stock-outs, and save money!
Your job will shift to focus on more strategic company initiatives.
The Keys to a Successful Implementation
¡ Obtain commitment of senior management at both the customer and supplier level
¡ Define expectations, service levels and risks up front!
¡ Obtain tight integration with backend systems
¡ Forecast collaboration
¡ Establish and maintain transparency throughout the entire process
¡ Communicate operational guidelines and requirements across all relevant eternal partners
¡ Align all organizations across mutual planning goals
¡ All parties must commit to their various roles and responsibilities
¡ Change management must be strictly enforced
Establish Appropriate KPIs and Measure, Measure, Measure!
An SBS case study: Overcoming a Supply Chain Challenge
Customer focus: Large Semiconductor OEM
The Problem A large semiconductor OEM needed to overcome a supply chain with an excessively large number of suppliers, low buying leverage, extended lead times, and numerous stock-outs.
A Case Study
The Review With more than 8,000 unique parts, many with a high volume and low dollar profile, the need was clear for vendor consolidation and a streamlined supply chain process.
The 6 Step Plan to Streamline the Supply Chain ① Dedicated an experienced resource on site to guide the
conversion of this massive number of items.
② Evaluated all data
③ Consolidated 100 suppliers and 8000 part number to 1 supplier (Supplier consolidation from many to one vendor revealed a double digit savings)
④ Routed thousands of SAP transactions to a supply base maintaining PO line and quality integrity
⑤ Converted inventory items to a Point of Use VMI, critical to the long term plan.
⑥ Implemented and monitored measurement metrics such as on-time performance, inventory turns, PPV and quality.
A Case Study
The SBS Solution ¡ Upon implementation, the VMI program was in
full gear handling thousands of floor locations daily.
¡ 8,000 parts were immediately converted to SBS and 9 vendors were eliminated.
¡ Customer purchasing was immediately able to start focusing on the strategic items.
¡ Review processes were put in place to constantly assess the mix of items to be managed by SBS.
A Case Study
Fast Fact Results ¡ 1,331 active part numbers
¡ 5,108 active bin locations
¡ 17,391 PO lines
¡ 4M incoming Parts
¡ Purchase prices declined and have remained stable over a five year period
¡ 97% of all items have lead times less than 30 days
¡ 99.97% on-time delivery
¡ 99.92% quality rating
¡ 1% favorable PPV (yr/yr)
A Case Study
Conclusion
A VMI program can deliver direct results to the bottom line. With today’s capabilities and working with a leading-edge VMI supplier like SBS, the question is not whether you can afford to implement a VMI program—but whether you can afford not to.
Contact us Today! [email protected]
800-322-7878
About SBS
SBS is a full-service solutions provider of fasteners, vendor managed inventory (VMI) programs and c-class commodities. We manage the supply chain to lower costs, reduce inventory and streamline the supply base for our customers worldwide.
Contact us Today! [email protected]
800-322-7878
Providing the expertise to manage the inventory of
your c-commodities so you don't have to!
