Every business report, white paper, and article over a certain length requires some sort of summary, that is, an executive summary or abstract. Quite often, busy executives rely heavily on the executi

Module Nine Homework

Darlene Ames

QSO 630: Supply Chain Management

Southern New Hampshire University

Question 3

In this chapter, we discuss three types of retailer supplier partnerships: quick response, continuous replenishment, and vendor-managed inventory (VMI). For each type, discuss situations where that type would be preferred over the other two. For instance, compare quick response to continuous replenishment: under what conditions is one preferred over the other (Simchi-Levi, Kaminsky, & Simchi-Levi, 2008, p. 263)

1. VMI-Vendor Managed Inventory is inventory that is managed by the vendor…at a minimum this means the vendor determines when to replenish and how much to replenish (Piasecki, 2015). The vendor is responsible for maintain pre-determined inventory levels at the retailers. This comes in handy for large chains with multiple departments such as Walmart and Toys R Us as it relieves the burden of having to carefully watch each and every product from the retailer. The reality is customers tend to choose to use VMI because it relieves them of the burden and responsibility of managing the inventory (Piasecki, 2015). If implemented correctly it can lead to more overall savings for both the supplier and retailer. You can see the potential here for your organization to reduce lost sales due to stock outs, reduce safety stock levels by having more control over shipment quantities and times to your customers, and prevent excess and obsolete inventory due to customer errors (Piasecki, 2015).

1. Quick Response Strategy – Quick Response Strategy retailers send POS (Point of Sale) date which is received by suppliers which help them to operate their production and inventory activities with actual sales at the retailer. Due to this strategy, inventory is completely handled by the retailer and also they help suppliers to improve their operations by providing POS data.

In the strategy, individual orders have been made by the retailer, but supplier improve forecasting and scheduling with the help of POS data to reduce local time just because the relationship is new between retailer-supplier, and trust play a vital role between two parties which is been in developing phase. Some examples of retailers in this category are locations with seasonal merchandise where the window to sell certain items in short in nature (swimsuits, snow boots, etc.)

1. Continuous Replenishment Strategy - Continuous Replenishment Strategy is also known as circulation. Here to maintain the level of inventory at regular interval vendor prepare shipments data with the help of received POS data.

In the advanced form of circulation, inventory level decreases gradually as suppliers end at the distribution center or at the retail store as long as the service level is completed.

Thus, in a proper way level of inventory are always improved in circulation order. Also, the level of inventory can't be a simple level, it could be based on experience models that change the level based on dependent, queering and changing customer mindset.

This type of partnership is middle layer between VMI (Vendor managed inventory) and quick response because both suppliers and buyers aggress on inventory target and service levels which involve less risk to retailers than VMI.

Due to which there are a long term relationship, bonding, and more stability between retailers and suppliers than quick response does.

Question Five

Discuss the various possibilities for inventory ownership policies in a VMI arrangement. What are the advantages and disadvantages of each of these policies (Simchi-Levi, et al.. 2008, p. 263)?

1. Originally ownership of goods transferred to the retailer when the goods were received (Simchi-Levi, et al.. 2008, pg.256). In this type of set up the benefits are with the supplier as they will want to move as much inventory to the retailer as possible. One possible criticism of the original VMI scheme is that the vendor has an incentive to move to the retailer as much inventory as the contract allows (Simchi-Levi, et al..2008, pg. 256). In some cases as such with a hot new seasonal item this is not necessarily a bad thing as the retailer will be replenished and be able to sell the much wanted item. More work will need to done by the retailer to make sure profits are maximized and costs minimized. The retailer will need to have set parameters in place and some type of other possible motivators to the supplier to not be overstocked when the items are not selling and to be kept at competitive inventory levels when the items are in high demand.

2. Depending on the VMI arrangement, the customer are giving up control of certain aspects of your business. You may also be providing the vendor with access to business information you consider to be confidential. Your vendor could be charging you for inventory you never received, using information they got from you to cut out the middleman or selling or sharing your business information with competitors.

It is more difficult for a customer to change suppliers once VMI has been implemented. It also makes it less likely the customer will shop around to other suppliers within a product group.

From the vendor’s perspective, he may be taking on the added task of managing his customer’s inventory (and the costs associated with that) without receiving any of the inventory management benefits. Theoretical benefits are just that—theoretical. You need to take steps to make sure theoretical benefits become actual benefits. In some cases, the vendor's costs for managing his customer’s inventory could be greater than the customer’s costs would have been to manage the same inventory. If this is the case, costs are being added to the supply chain without any benefit. Ultimately this will likely hurt both the vendor and the customer.

1. The most common cause of VMI failure revolves around communication breakdowns. All of these problems in implementing a VMI program can be significantly diminished if they are adequately addressed at the beginning of discussions. Hence, there should be several in-depth meetings upfront to avoid problems down the road.

References

Piasecki, D. (2015). Vendor-Managed Inventory (VMI): What is it and When Does it Make Sense to Use It, www.inventoryops.com

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Chapter 8: Strategic Alliances. In Designing and Managing the Supply Chain (3rd ed.). New York, NY: McGraw Hill Irwin

Songini, M. (2001). How-To Quick Response, www.computerworld.com