the impact of vendor-managed inventory on retail logistics · pdf filethe impact of...
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The impact of vendor-managed inventory on retail logisticsIr. Roel Post – University of Groningen
Erasmus 17 M
ay 2017
Retail supply chains
Vendor
Vendor
Vendor
Distributioncenter
Store
Store
Store
Process:
The replenishment processRM
IVM
I
RetailerVendor
The replenishment process
For which vendor context can VMI improve supply chain performance?
Mixed results in practiceSuccessesWalmartProcter and gambleElectrolux+ multiple unspecified cases studied
FailuresSparta storesK-mart (partial)
Impact of context factorsStable demand Clarke and Hammond, 1997Niranjan et al., 2012Yang et al., 2003
Unstable demand Disney and Towill, 2003Småros et al., 2003
Conflicting results of VMI
Literature study
Case study
Process opportunities
condition
Organizational opportunities
condition
Methodology Framework
3 components of VMI
Empirical verification and
specification
Results
Research outline
The components of VMI
Information sharing
Decisiontransfer
Inventoryrelocation
The 3 components of VMI
Has better access to information
Can store and combine more information
Can improve forecasting quality
and fit
Information sharing improves Supply Chain performance through uncertainty reduction only if the vendor:
Information sharing
Transferring all replenishment decisions to the vendor improves SC performance only if the vendor:
Can remove constraints
Increase the updating frequency
Improve the quality of
inventory rules
Decision transfer
Enabling the vendor to move inventory to the retailer’s facility improves operational performance, only if the vendor:
Is able to move inventory down the supply chain
Can operate remote inventory
Prevents errors down the supply chain
Inventory relocation
VMI framework
Process opportunity
Organization opportunity
Decisiontransfer
Informationsharing
Stock relocation
VMI framework
VMI GAINS
Risk ofperformance
decrease
Organizational mismatch
(unseized potential)
Process mismatch
(disappointment)
Positive
None Large
Negative
Proc
ess o
ppor
tuni
ties
Do th
e ad
vant
ages
of V
MI a
pply
on
the
repl
enish
men
t pro
cess
?
Organizational opportunitiesCan the vendor organization realize opportunities that the buyer could not?
VMI framework
Process and demand uncertainty
ProcessOpportunities
Trivial situations/Dedicated chains
Complexity too high to operate
Uncertainty reduced/Constraints removed
Process opportunity
Vendor organization size and relation importance
OrganizationOpportunity
Already optimized
Vendor lacks expertise/Retailer moresuited
Vendor can improve monitoring and methods
Organization opportunity
Process opportunity
Organization opportunity
Decisiontransfer
Informationsharing
Stock relocation
Applying the framework
Process opportunity
Organization opportunity
Decisiontransfer
Informationsharing
Stock relocation
++
+
_
++ _
__
Applying the framework
VMI GAINS
Risk ofperformance
decrease
Organizational mismatch
(unseized potential)
Process mismatch
(disappointment)
Positive
None Large
Negative
Proc
ess o
ppor
tuni
ties
Do th
e ad
vant
ages
of V
MI a
pply
on
the
repl
enish
men
t pro
cess
?
Organizational opportunitiesCan the vendor organization realize opportunities that the buyer could not?
Applying the framework
We can only understand impact of VMI if we examine the separate components
(Trust in) stable flows in the supply chain are crucial for VMI success
Conclusion
