09-05-2024

SUPPLY CHAIN
Module 3

What is Supply chain ??

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a
customer request. The supply chain includes not only the manufacturer and
suppliers, but also transporters, warehouses, retailers, and even customers
themselves.

Within each organization, such as a manufacturer, the supply chain includes all
functions involved in receiving and filling a customer request. These functions
include, but are not limited to, new product development, marketing, operations,
distribution, finance, and customer service.

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Supply Chain Example

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Consider a customer walking into a Wal-Mart store to purchase detergent. The

supply chain begins with the customer and his or her need for detergent. The
next stage of this supply chain is the Wal-Mart retail store that the customer
visits.

Wal-Mart stocks its shelves using inventory that may have been supplied from a
finished-goods warehouse or a distributor using trucks supplied by a third party.
The distributor in turn is stocked by the manufacturer (say, Procter & Gamble
[P&G].

The P&G manufacturing plant receives raw material from a variety of suppliers,
who may themselves have been supplied by lower-tier suppliers. For example,
packaging material may come from Pactiv Corporation (formerly Tenneco
Packaging) while Pactiv receives raw materials to manufacture the packaging
from other suppliers.

Stages of a detergent supply chain

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Let's consider an Indian example for the supply chain

of a detergent product.
Customer Demand:
Indian consumers have a need for detergent, initiating the demand.
Retail Store (Example: Big Bazaar):
The customer visits a retail store like Big Bazaar, one of the prominent retail chains in
India, to purchase the detergent.
Distribution from Finished-Goods Warehouse or Distributor:
Big Bazaar replenishes its stock by receiving detergent from a distributor or a central
warehouse. Logistics companies or third-party providers may be involved in
transporting these goods.
Distributor:
The distributor, perhaps a company like Future Supply Chain Solutions in India,
manages the logistics and distribution of detergent to retailers like Big Bazaar.

Manufacturer (Example: Hindustan Unilever Limited [HUL]):

HUL, one of the largest FMCG (Fast-Moving Consumer Goods) companies in India, operates
manufacturing plants where they produce the detergent. HUL is known for brands like Surf Excel and
Rin.

Raw Material Suppliers:

HUL sources raw materials for detergent production from various suppliers. For instance, chemicals,
surfactants, and fragrance components may be obtained from different suppliers within India.

Lower-Tier Suppliers:

These lower-tier suppliers provide specific raw materials needed in the detergent production process.
They could include chemical manufacturers, fragrance suppliers, or packaging material providers based
in India.

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1. Farmer:
• Activity: The farmer cultivates and harvests grains.
• Value Addition: The farmer adds value by producing raw grains efficiently, ensuring quality, and
adopting sustainable agricultural practices.

2. Grain Wholesaler:
• Activity: Purchases grains in bulk from multiple farmers, aggregates and stores them.
• Value Addition: The wholesaler adds value by providing a convenient point of sale for farmers,
ensuring efficient logistics for transporting grains to storage facilities, and offering quality assurance
through inspection.

3. Cereal Producer:
• Activity: Utilizes grains to produce cereals, including processing, packaging, and branding.
• Value Addition: The cereal producer adds value through processing expertise, creating a branded
product with specific attributes, and ensuring consistent quality and safety standards.

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4. Grocery Wholesaler:
• Activity: Purchases cereals in bulk from multiple producers, stores them in warehouses, and distributes
to retailers.
• Value Addition: The wholesaler adds value by providing a centralized point for retailers to source a
variety of cereals, managing inventory efficiently, and offering reliable and timely deliveries.

5. Grocery Retailer:
• Activity: Sells cereals directly to consumers in a retail setting.
• Value Addition: The retailer adds value by providing a convenient location for customers to purchase
cereals, offering a diverse selection, ensuring product availability, and providing customer service.

6. End Customer:
• Activity: Purchases and consumes cereals.
• Value Addition: The end customer receives value through convenience, a variety of choices,
assurance of quality and safety, and the availability of cereals in a convenient retail setting.

Logistics and Supply chain management

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Logistics and supply chain management are related concepts, but they refer to different
aspects of the broader process of moving products from the manufacturer to the end
consumer. Here are the key differences between logistics and supply chain:

Scope:
▪ Logistics: Logistics is a subset of supply chain management. It specifically focuses on the
physical movement and coordination of goods, including transportation, warehousing, and
distribution.
▪ Supply Chain: Supply chain management encompasses a broader range of activities, including
procurement, production, transportation, distribution, and customer service. It involves the
entire network of organizations and processes that contribute to delivering a product to the end
consumer.

Functions:
▪ Logistics: Key functions within logistics include transportation management, inventory management,
warehousing, order fulfillment, and the coordination of activities to ensure timely and cost-effective
delivery.
▪ Supply Chain: Supply chain management includes logistics functions but extends beyond them. It
involves procurement, production planning, demand forecasting, supplier relationship management, and
strategic decision-making to optimize the entire process.

Focus:
▪ Logistics: Logistics primarily deals with the efficient movement of goods and information from the point
of origin to the point of consumption. It involves transportation management, warehousing, order
fulfillment, and inventory control.
▪ Supply Chain: Supply chain management takes a holistic approach, considering the entire journey of a
product from raw material extraction to the final delivery to the customer. It involves strategic planning
and coordination of various interconnected activities.

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Timeframe:
▪ Logistics: Logistics is more focused on the immediate and tactical aspects of moving goods. It
deals with day-to-day operations to ensure the timely delivery of products.
▪ Supply Chain: Supply chain management takes a longer-term and strategic perspective. It
involves planning for the entire product life cycle, including sourcing, production, and
distribution.

Integration:
▪ Logistics: Logistics tends to focus on individual functions and their efficient execution. It may
involve coordination between different logistics functions but is more operationally oriented.
▪ Supply Chain: Supply chain management emphasizes the integration of various functions,
both within and outside an organization. It involves collaboration with suppliers,
manufacturers, distributors, and retailers to create a seamless and efficient process.

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Internal and External Supply chain

Internal Supply Chain:

Definition: The internal supply chain refers to the flow of goods, information, and processes within an individual
company or organization. It involves the coordination of activities from the sourcing of raw materials to the delivery
of finished products or services to end customers, all within the boundaries of the same organization.

Key Characteristics:

• Primarily involves activities and processes within the company.

• Focuses on optimizing internal operations for efficiency and cost-effectiveness.

• Includes functions like procurement, production, inventory management, and distribution within the organization.

Example: In a manufacturing company, the internal supply chain encompasses processes such as procuring raw
materials, manufacturing products, managing inventory, and coordinating the movement of products within the
company's facilities.

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External Supply Chain:

Definition: The external supply chain involves the network of organizations, suppliers, manufacturers, distributors, retailers,
and other partners outside a specific company that collectively contribute to delivering a product or service to the end
customer. It extends beyond the organizational boundaries to include external stakeholders and partners in the supply chain
process.

Key Characteristics:

Encompasses the entire supply chain network, involving external entities.

•

Involves collaboration and coordination with suppliers, manufacturers, distributors, and retailers.
•

Focuses on managing relationships and ensuring seamless integration with external partners.
•

Example: In the context of a retail company, the external supply chain includes relationships with suppliers for procuring
products, logistics providers for transportation, and collaboration with distribution centers and retail stores to ensure products
reach end customers.

Manufacturing Supply Chain:

• The manufacturing supply chain and service supply chain are both crucial components of the
broader supply chain ecosystem, but they differ in several key aspects.
Manufacturing Supply Chain:
1.Physical Products: Manufacturing supply chains deal with the production and distribution of
physical goods. This includes raw materials sourcing, manufacturing processes, assembly,
packaging, and distribution.
2.Inventory Management: Managing inventory levels is critical in manufacturing supply chains to
ensure a balance between demand and supply. Just-in-time (JIT) and lean manufacturing
principles are often employed to minimize inventory holding costs while ensuring timely
production.
3.Production Planning: Manufacturing supply chains require detailed production planning to
optimize resources, minimize waste, and meet demand forecasts. This involves scheduling
production runs, allocating resources, and ensuring efficient use of machinery and labor.
4.Quality Control: Maintaining consistent product quality is essential in manufacturing supply
chains. Quality control processes are implemented throughout the production cycle to identify and
rectify defects, ensuring that finished products meet customer expectations.
5.Logistics and Distribution: Once products are manufactured, they need to be efficiently
transported to distribution centers or directly to customers. Logistics operations, including
transportation, warehousing, and order fulfillment, play a crucial role in ensuring timely delivery.

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Service Supply Chain:

1.Intangible Services: Unlike manufacturing supply chains, service supply chains deal with
the delivery of intangible services rather than physical products. This includes services
such as healthcare, hospitality, transportation, and professional services.
2.Customer Interaction: Service supply chains often involve direct interaction with
customers. This interaction can occur at various touchpoints, including online platforms,
physical locations, or through customer service channels.
3.Resource Management: Service supply chains require efficient management of human
resources, technology, and infrastructure to deliver services effectively. This involves
scheduling staff, optimizing service routes, and ensuring the availability of necessary
equipment and facilities.
4.Service Quality: Ensuring high-quality service delivery is paramount in service supply
chains. Service providers must focus on factors such as responsiveness, reliability,
empathy, and assurance to meet customer expectations and build long-term relationships.
5.Demand Forecasting: Similar to manufacturing supply chains, service supply chains also
rely on demand forecasting to anticipate customer needs and allocate resources
accordingly. This involves analyzing historical data, market trends, and customer behavior
to make informed decisions.

Decision Phases of a Supply Chain

• Supply chain strategy or design

How to structure the supply chain over the next several years

• Supply chain planning

Decisions over the next quarter or year

• Supply chain operation

Daily or weekly operational decisions

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Supply Chain Strategy or Design

• Decisions about the structure of the supply chain and what processes each
stage will perform.
• Strategic supply chain decisions
➢Locations and capacities of facilities
➢Products to be made or stored at various locations
➢Modes of transportation
➢Information systems.
• Supply chain design must support strategic objectives.
• Supply chain design decisions are long-term and expensive to reverse—must
take into account market uncertainty.

Supply Chain Planning

❑Forecast for the coming year

❑ Analyses demand in different markets
❑ Which market? Location?
❑ Inventory policies
❑ Timing
❑ Size of marketing
❑ Price promotions

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Forecast for the Coming Year: Supply chain planning begins with forecasting
future demand for products or services over a specified time period, typically
the coming year. This forecast serves as the foundation for planning production,
procurement, inventory, and distribution activities.
Analyses Demand in Different Markets: Supply chain planning includes
analyzing demand patterns in different markets or customer segments to
understand variations in demand drivers, preferences, and buying behaviors.
This analysis helps in developing tailored strategies for each market to optimize
inventory levels and distribution channels.
Which Market? Location?: Supply chain planning identifies target markets
based on factors such as geographical location, demographics, purchasing
power, and market potential. Location analysis helps in determining optimal
distribution networks, warehouse locations, and transportation routes to
efficiently serve each market while minimizing logistics costs.

Forecast for the Coming Year: Supply chain planning begins with
forecasting future demand for products or services over a specified time
period, typically the coming year. This forecast serves as the foundation for
planning production, procurement, inventory, and distribution activities.

Analyses Demand in Different Markets: Supply chain planning includes

analyzing demand patterns in different markets or customer segments to
understand variations in demand drivers, preferences, and buying behaviors.
This analysis helps in developing tailored strategies for each market to
optimize inventory levels and distribution channels.

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Which Market? Location?: Supply chain planning identifies target markets

based on factors such as geographical location, demographics, purchasing
power, and market potential. Location analysis helps in determining optimal
distribution networks, warehouse locations, and transportation routes to
efficiently serve each market while minimizing logistics costs

Price Promotions: Supply chain planning incorporates pricing strategies and

promotional activities into demand forecasting and inventory planning
processes. Price promotions, discounts, and incentives are coordinated with
production schedules, inventory levels, and distribution channels to capitalize
on market opportunities and drive sales.

3. Supply chain operations

• weekly or daily operation decisions

• Individual customer orders

• Allocation of inventory and production

• Set dates for activities

• Generate lists for warehouses

• Allocation of shipments

• Schedules of trucks.

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Process View of a Supply Chain

➢Cycle view: Processes in a supply chain are divided into a series of cycles, each
performed at the interfaces between two successive supply chain stages.

➢Push/Pull view: Processes in a supply chain are divided into two categories depending
on whether they are executed in response to a customer order (pull) or in anticipation of a
customer order (push).

Cycle View of Supply Chain Processes

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Each cycle consists of six subprocesses as shown in Figure. Each cycle

starts with the supplier marketing the product to customers. A buyer then
places an order that is received by the supplier.

The supplier supplies the order, which is received by the buyer. The buyer
may return some of the product or other recycled material to the supplier
or a third party. The cycle of activities then begins all over again.

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Push/Pull View of Supply Chain

▪ Most Companies are both supplier to the customers and also are a customer for their
suppliers. Hence they are just a link in a chain.
▪ All processes in a supply chain fall into one of two categories depending on the timing of
their execution relative to end customer demand.
▪ With pull processes, execution is initiated in response to a customer order. With push
processes, execution is initiated in anticipation of customer orders based on a forecast.
▪ Pull processes may also be referred to as reactive processes because they react to customer
demand.
▪ Push processes may also be referred to as speculative processes because they respond to
speculated (or forecasted) rather than actual demand.

Push View:
1. In a push view, production is based on forecasts and anticipated demand. Manufacturers
produce goods based on their predictions of what customers will need.
2. Inventory is pushed downstream through the supply chain, from manufacturers to
distributors to retailers, without waiting for actual customer orders.
3. An example of a push view would be a bakery that produces a certain amount of bread
each day based on historical sales data and expected demand. The bakery pushes the
bread out to grocery stores regardless of whether those specific stores have already
placed orders.
Pull View:
1. In a pull view, production is triggered by actual customer demand. Manufacturers only
produce goods when there is a confirmed order from downstream partners or end
customers.
2. Inventory is pulled through the supply chain in response to customer orders, reducing
the risk of overproduction and excess inventory.
3. An example of a pull view would be a made-to-order furniture manufacturer. They only
produce furniture items after receiving orders from customers. The production process
is initiated by customer demand, and the furniture is pulled through the supply chain as
orders are placed.

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Push/Pull View—L.L. Bean

Push/Pull View—Dell

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Supply Chain Performance: Achieving Strategic Fit

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A company may fail either because of a lack of strategic fit or because its overall
supply chain design, processes, and resources do not provide the capabilities to
support the desired strategic fit.
Consider, for example, a situation in which marketing is publicizing a
company’s ability to provide a large variety of products quickly; simultaneously,
distribution is targeting the lowest cost means of transportation. In this situation,
it is likely that distribution will delay orders so it can get better transportation
economies by grouping orders together or using inexpensive but slow modes of
transportation. This action conflicts with marketing’s stated goal of providing
variety quickly.
Similarly, consider a scenario in which a retailer has decided to provide a high
level of variety while carrying low levels of inventory but has selected suppliers
and carriers based on their low price and not their responsiveness. In this case,
the retailer is likely to end up with unhappy customers because of poor product
availability.

How is Strategic Fit Achieved?

Step 1: Understanding the customer and supply chain uncertainty

Step 2: Understanding the supply chain capabilities

Step 3: Achieving strategic fit

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1. Understanding the Customer and Supply Chain Uncertainty: First,

a company must understand the customer needs for each targeted segment
and the uncertainty these needs impose on the supply chain. These needs
help the company define the desired cost and service requirements. The
supply chain uncertainty helps the company identify the extent of the
unpredictability of demand, disruption, and delay that the supply chain
must be prepared for.
2. Understanding the Supply Chain Capabilities: Each of the many
types of supply chains is designed to perform different tasks well. A
company must understand what its supply chain is designed to do well.
3. Achieving Strategic Fit: If a mismatch exists between what the supply
chain does particularly well and the desired customer needs, the company
will either need to restructure the supply chain to support the competitive
strategy or alter its competitive strategy.

Understanding the Customer and Supply Chain Uncertainty: Apple

understands its diverse customer base, ranging from individual consumers
purchasing iPhones and iPads to businesses procuring MacBooks and other
devices in bulk. Apple's supply chain must cater to varying customer needs, such
as fast delivery times for individual consumers and customized configurations
for businesses. Additionally, Apple faces uncertainties such as fluctuations in
demand due to product launches, geopolitical tensions affecting component
sourcing, and unexpected disruptions like natural disasters. By understanding
these needs and uncertainties, Apple can adjust its supply chain to meet demand
fluctuations and mitigate risks effectively.
Understanding the Supply Chain Capabilities: Apple's supply chain is
designed for innovation, quality, and speed. It leverages strategic partnerships
with suppliers like Foxconn for manufacturing and invests in cutting-edge
technology for product development. Apple's supply chain capabilities include
efficient manufacturing processes, just-in-time inventory management, and
stringent quality control measures. These capabilities enable Apple to deliver
high-quality products consistently while maintaining a competitive edge in the
tech industry.

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Achieving Strategic Fit: Apple's supply chain aligns closely with its competitive strategy
of offering premium, innovative products to customers worldwide. For example, Apple's
emphasis on product design and user experience is supported by its supply chain's ability to
source high-quality materials and components globally. Furthermore, Apple's supply chain
agility allows it to respond quickly to changing market demands and introduce new
products efficiently. By achieving strategic fit, Apple ensures that its supply chain
capabilities complement its competitive strategy, enabling it to deliver value to customers
while maintaining its market leadership position.

In summary, Apple exemplifies how understanding customer needs, leveraging supply

chain capabilities, and achieving strategic fit are essential for success in the technology
industry.

Step: 1

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Step: 2

Step: 3

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Efficient and Responsive Supply chain

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Supply Chain I
• Supplier: Absorbs the least implied uncertainty and must be very efficient.
This means the supplier likely manufactures high-volume, standardized
products with predictable demand. They can focus on optimizing
production for low costs.
• Manufacturer: Absorbs less implied uncertainty and must be somewhat
efficient. The manufacturer receives a more predictable flow of materials
from the supplier, but may still have to deal with some variation in demand
from the retailer. They can achieve a balance between efficiency and
responsiveness.
• Retailer: Absorbs the most implied uncertainty and must be very
responsive. The retailer faces the most unpredictable demand and needs to
be adaptable to respond to market shifts. They may carry more safety stock
to handle fluctuations.

Supply Chain II

• Supplier: Absorbs less implied uncertainty and must be somewhat efficient.

The supplier likely manufactures a wider variety of products or faces more
volatile demand for their supplies. They need to be more flexible than the
supplier in Supply Chain I but can still focus on some level of efficiency.
• Manufacturer: Absorbs most of the implied uncertainty and must be very
responsive. The manufacturer receives a less predictable flow of materials
from the supplier and faces variable demand from the retailer. They need to
be highly responsive to changes in order to avoid stockouts or excess
inventory.
• Retailer: Absorbs the least implied uncertainty and must be very efficient.
The retailer experiences the most stable demand in this scenario. They can
focus on optimizing their operations for efficiency since they can rely on
the manufacturer to be responsive.

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Example(achieving strategic fit via SCM)

Let's consider the example of a company implementing a differentiation

strategy in the smartphone industry. The competitive strategy aims to create
unique and innovative features that set the company's smartphones apart
from competitors. In this case, the supply chain strategy needs to be aligned
to support and enhance the differentiation strategy.

Innovation in Product Design:

• Competitive Strategy: Introduce cutting-edge features and technologies

in smartphones to differentiate them from competitors.

• Supply Chain Strategy: Establish close collaboration with suppliers and

technology partners to ensure timely access to the latest components and
innovations. Implement efficient processes for incorporating new
technologies into the manufacturing process.

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Speed to Market:

• Competitive Strategy: Aim to be the first to market with new and

innovative smartphone features.

• Supply Chain Strategy: Optimize logistics and distribution channels

to reduce lead times. Establish efficient communication and
collaboration with suppliers to ensure timely delivery of components,
allowing the company to bring new products to market quickly.

Global Expansion:

• Competitive Strategy: Expand into new international markets to reach a

broader customer base.

• Supply Chain Strategy: Develop a global supply chain network that can
efficiently manage international suppliers, navigate trade regulations, and
optimize transportation across borders. Implement supply chain strategies
that address the specific challenges of operating in diverse geographic
locations.

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What is Bullwhip !!
• Bullwhip effect is a phenomenon in forecast driven
distribution channels detected by supply chain.
• In bullwhip effect order sent to the manufacturer and
supplier create larger variance then the sales to the
end customers.

Effects Of Bullwhip
• In a supply chain plagued with Bullwhip effect, the distortion in
information is escalated as it moves up in the chain.
• This variance can interrupt the smoothness of the supply chain
process as each link in the supply chain will over or underestimate the
product demand i.e. exaggerated fluctuations.

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Contribution towards bullwhip effect

There are many factors to cause bullwhip effect
• Disorganization between each supply chain link if it occurs then due to non
uniformity in ordering leads to over or under reaction to the supply chain
beforehand.
• Lack of communication between each link in the supply chain makes it difficult for
the process to run smoothly and therefore order different quantities.
• Free return policies , customers order more demands intentionally to meet there
inventory but cancel in between when supply becomes adequate.
• Order batching creates variability in the demand as there may be surge in
demand at some stage followed by no demand.

Symptoms of bullwhip
Some symptoms of Bullwhip are:
• Excessive inventory
• Poor product forecast
• Insufficient capacities
• Long backlogs
• Uncertain Product planning

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Excessive LONG BACKLOGS

inventory

UNCERTAIN PRODUCT
PLANNING

BULLWHIP EFFECT EXAMPLE

MANUFACTURER

DISTRIBUTOR

UNITS
RETAILER

CUSTOMER

0 20 40 60 80 100 120

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BULLWHIP EFFECT EXAMPLE

• In the above example, the actual demand for customer is 10 units, the retailer then
orders 15 units from the distributor , an extra 5 units in order to ensure they don’t
run out of stock.

• Then the supplier orders 40 units from manufacturer so that to buy in bulk to
ensure enough stock to provide timely shipment of goods to retailer

• The manufacturer then receives the order and it orders from their supplier in bulk
i.e. 100 units to ensure economy of sale in production to meet demand.

• Now 100 units have produced to meet demand of 10 units which means the
retailer has to increase demand by dropping prices or finding more customers that
causes bullwhip effect.

BULLWHIP EFFECT EXAMPLE

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CAUSES OF BULLWHIP EFFECT

Vendor Managed Inventory

A Solution to Bullwhip Effect

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Vendor Managed Inventory (VMI)

▪ VMI is an inventory management process where the traditional ordering model is
eliminated and the vendor has the right and responsibility to make stock
replenishment decisions based on agreed targets and regular automatic inventory
and/or sales data from buyer.
▪ VMI is an alternative to the traditional order-based replenishment practice, being a
more efficient supply chain integration strategy and collaboration concept. In a
VMI relationship, the vendor is empowered to manage a customer’s inventory and
replenish the goods at the customer’s site automatically under agreed conditions
and rules.
▪ Instead of sending purchase orders, buyers send inventory and sales information
electronically to the vendor. Based on this demand data, the vendor makes periodic
resupply decisions regarding order quantities, shipping and timing (see Figure 1).
The information about real demand will be transparent to the vendor, reducing
uncertainty for its production and operational planning.

Replenishment process in VMI

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Vendor Managed Inventory (VMI)

• Vendor Managed Inventory simply means the vendor (the Manufacturer / Producer)
manages the inventory of the distributor.
• Vendor Managed Inventory or VMI is a process where the vendor creates orders for
their customers based on demand information that they receive from the customer. VMI
is a streamlined approach to inventory management and order fulfilment. VMI involves
collaboration between suppliers and their customers which changes the traditional
ordering process.
• Instead of sending purchase orders, customers electronically send daily demand
information to the supplier. The supplier generates replenishment orders for the
customer based on this demand information. The process is guided by mutually agreed
upon objectives for the customer's inventory levels, fill rates, and transaction costs.

WHY SHOULD ONE IMPLEMENT VMI

• VMI offers a symbiotic relationship. Hence, it reduces the chances of stock out occurrences
along with ensured inventory reduction.

• Also, to manage and monitor the consumption, the vendor might place its representatives on
site, at the retailer’s end.

• This way the vendor can ensure that her product display at the store is as per her expectations,
and the retail staffs at the store are also aware or accustomed with the product features which
will aid not just the retailer but the vendor in increasing the sales of her products.

• VMI offers the benefit of shared risks between the two involved parties, i.e. if the inventory
fails to sell off the shelves, the vendor might repurchase it from the retailer or the ownership of
the product might have been with the vendor until final sales take place, an arrangement known
as ‘consignment’.

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For the customer, VMI results For the supplier, VMI

in increased profitability due results in increased
to:
profitability due to:
• Reduced
BENEFITS OF inventory/increased turns • Increased sales
VMI • Reduced administrative • Reduced operating costs
costs • Stronger customer
• Fewer stock-outs or relationships
shortages
• Increased sales (for
distributors and retailers)

VMI benefit Examples

WalMart and Procter & Gamble have had a VMI programme together
for over 30 years to manage the inventory and production of disposable
diapers with great success. Inventory turns doubled, WalMart’s
operating costs fell, and Procter & Gamble’s market share grew.
In 2014, Coca Cola Hellenic (CCH) successfully implemented VMI
with Tesco for the Island of Ireland. CCH gained access to Tesco
replenishment systems to control the flow of inventory into the two
Tesco warehouses on the island. This resulted in improvement in service
levels from 94% to 99%.

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