rashmi final project

8/3/2019 rashmi final project

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Vendor-Management Inventory: Introduction

1. Vendor-management inventory (VMI) is a family ofbusiness models in

which the buyer of a product provides certain information to a supplier

of that product and the supplier takes full responsibility for maintaining an

agreed inventory of the material, usually at the buyer's consumption

location (usually a store).

2. Vendor Managed Inventory (VMI)by Park City Group is a great way to

manage your relationships with retailers and ensure that your inventory

levels are always at optimal levels.

3. Vendor-managed inventory (VMI) lets companies reduce overhead by

shifting responsibility for owning, managing, replenishing inventory to

vendors. Vendors track goods shipped to distributors and retail outlets,

and monitor retail supplies, enabling the vendors to replenish inventories

when supplies are low. The practice is common in the retail sector, and is

also used in other phases of supply chains. Not only do assets decrease,

the amount of working capital needed to operate a business decreases.

4. VMI is a means of optimizing Supply Chain performance in which the

manufacturer is responsible for maintaining the distributors inventory

levels. The manufacturer has access to the distributors inventory data andis responsible for generating purchase orders. To further define it, lets

look at 2 business models:

5. VMI means that third-party logistics provider can also be involved to

make sure that the buyer has the required level of inventory by adjusting

the demand and supply gaps.

6. VMI helps foster a closer understanding between the supplier and

manufacturer by using Electronic Data Interchange formats, EDI

software and statistical methodologies to forecast and maintain correct

inventory in the supply chain.

7. Vendor Managed Inventory simply means the vendor (the Manufacturer)

manages the inventory of the distributor. The manufacturer receives

electronic messages, usually via EDI, from the distributor. These messages


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tell the manufacturer various bits of information such as what the

distributor has sold and what they have currently in inventory. The

manufacturer reviews this information and decides when it is appropriate

to generate a Purchase Order.

To further explain Vendor Managed Inventory, lets look at an example. Prior to

implementing a VMI program, a Widget Distributor operated under a non-VMI business

model. It created an inventory plan, then monitored and controlled it's own inventory

levels. When the company felt it needed more inventory, they would place a Purchase

Order against the manufacturer. However, under a Vendor Managed Inventory setup, the

Widget Manufacturer would setup the Distributors inventory plan. The Manufacturer

would then monitor the Distributors inventory levels, keeping track of the sales and the

current inventory level. Once the Manufacturer believed the Distributors inventory levels

were too low, the Manufacturer would generate the Purchase Order and ship the product

to the Distributor. Vendor Managed Inventory gives the control over the inventory to the

Manufacturer.

Thus, Vendor Managed Inventory promotes a strong partnership between the

Manufacturer and the Distributor. Vendor Managed Inventory (VMI) is a streamlinedapproach to inventory management and order fulfillment. VMI involves collaboration

between suppliers and their customers (e.g. distributor, retailer, OEM, or product end

user) which changes the traditional ordering process.


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Vendor Managed Inventory (VMI): How does It Work

The goal of Vendor Managed Inventory is to provide a mutually beneficial relationship

where both sides will be able to more smoothly and accurately control the availability

In VMI a manufacturer or distributor assumes the role of inventory planning for the

customer. Extensive information sharing is required so that the manufacturer/distributor

can maintain a high degree of visibility of its goods at the customers location. Instead of

the customer reordering when its supply has been exhausted, the supplier is responsible

for replenishing and stocking the customer at appropriate levels. Wal-Mart has mastered

VMI and is the company against which many other organizations benchmark themselves.

How to make VMI work


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1, Clarify expectations.

There needs to be thorough discussion about how the system will benefit both

organizations in the long term or one of the parties, particularly the supplier, is

prone to disappointment with some of the short-term results. If these items are not

addressed the program will likely be terminated quickly with neither side gaining

any of the benefits expected from the program. The objective is clear and constant

communication between the supplier and customer. When the two parties work in

conjunction they can be assured that the planning function, for both sides, will

begin to smooth over time.

2. Agree on how to share information.

If the supplier and customer can agree to share information vital to restocking in a

timely manner, then the odds of a synchronized system will dramatically improve.

Proprietary information would not have to be shared between the supplier and

customer, but enough information to maintain a steady flow of goods is necessary.

3. Keep communication channels open.

When the two parties set out to implement a VMI program, they need to meet and

discuss their goals and how they need to proceed in order to realize those goals.

Once a VMI program has been activated, each side needs to understand that there

are going to be some miscues. These miscues need to be studied as opportunities

for learning and then used to avoid repetitive problems in the future.

How does the Manufacturer Monitor the Distributors inventory?

One of the ways a Manufacturer can monitor a Distributors inventory is through the use

of EDI (Electronic Data Interchange). Below we have listed a few of the EDI sets that

may be used.

EDI Documents used in VMI


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EDI is an integral part of VMI process. Some of the EDI transactions used in VMI are

listed below:

#852 - Product Activity - Sent by the Distributor

The distributors inventory level and product activity.

The standard #852 only transmits a "change" since the previous transmission. An

"All Item Refresh" sends every field for every item.

#855 - Recommend Replenishment - Sent by the Manufacturer.

The order the manufacturer has created.

#856/857 - Advanced Ship Notice - Sent by the Manufacturer.

Sent out right before the Shipment leaves the Manufacturer.

#861 - Receipt Advise - Sent by the Distributor.

What the Distributor actually Received. #810 - Invoice - Sent by the Manufacturer.

Electronic Billing.

#820 Payment/Remittance Advise - Sent by the Distributor.

How to start up a Vendor Managed Inventory program

There are 2 different ways to start up a VMI program.

1. Homemade System: Some companies decide to build their own software. It requires

expert knowledge in the area of VMI, Inventory Management and of course, a few good

programmers.

Benefits: The benefit of this type of system is that it can be customized

specifically for your business needs. You can build the system to reflect theuniqueness of your company.

Pitfalls: you must have a project group that includes true experts in VMI &

Inventory Management. They must have a true understanding of exactly how

Vendor Managed Inventory operates. This would include the EDI sets used as

well as how to construct a reliable inventory plan. Additionally, you may


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encounter issues with your programmers. Once your system is completed, will

they be available for future updates or enhancements? In most companies, the

project team would have the use of programmers only for a short period. Since

most VMI systems need to grow or improve over time, you'll need to have

programmers at your disposal on an ongoing basis. Most of the companies I have

spoken to that have built their own systems eventually decide to go with a Pre-

packaged System (see below).

2. PrePackaged: There are a few very good off the shelf VMI packages on the market

today. The software usually has most of the needed basic functionality. Usually it can be

customized to meet your companies specific needs.

Benefits: Most of these packages meet all of the standard VMI

Pitfalls: There may be additional charges for any customization you require. Also,

you can probably expect additional charges for periodic systems upgrades.

Unexpected demand changes by the customer need to be shared with the supplier.

Changes in demand could result from the customer acquiring a new, large customer

opening of a great deal of stores in a short period; or offering special promotions that

create spikes in demand. The supplier may be unable to schedule production or shipmentin a timely manner, causing a drop in inventory available for the customer to sell in the

event of a foreseen increase in demand. A spike in demand could also create a burden on

the supplier, who will have to reprioritize its production plan or inventory from one

customer to another.

Likewise, if the supplier is experiencing a significant spike in demand from a major

customer, it may be wise to let the VMI customer, and other customers as well, know that

the supplier will have very little flexibility over a certain period of time, so that everyone

can adjust accordingly.

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


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several in-depth meetings upfront to avoid problems down the road

Developments Jointly Managed Inventory: VMI is a stepping-stone toward an emerging

process called Jointly Managed Inventory. In Jointly Managed Inventory a partnership

between the supplier and customer is formed. This solidifies the current VMI

relationship. Jointly Managed Inventory (JMI) is a much more detailed extension of VMI

but the goals and premise are quite similar. It takes the foundation from which the

relationship has already been built and fine-tunes it. This partnership involves increased

tactical planning between the supplier and customer when developing JMI. This should

include, but is not limited to, the customer integrating the supplier into the customers

This integration allows the supplier to gain insight into real-time sales data to further

improve the replenishing function while being able to better plan its own

production/distribution system to meet the customers needs. Proceeding to this step will

further solidify the relationship and produce a favorable outcome for each party.


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Goals and Objectives:

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.:

Improved Inventory Turns

Improved Service

Increased Sales

The Vendor Managed Inventory (VMI) is essentially Electronic Data Interchange

(EDI) where the retailer has given their vendor access rights to their point-of-sale

(POS) system.

VMI makes it less likely that a business will unintentionally become out of stock

of a good and reduces inventory in the supply chain.

vendor (supplier) representatives in a store benefit the vendor by ensuring the

product is properly displayed and store staffs are familiar with the features of the

product line, all the while helping to clean and organize their product lines for the

store.

VMI work is shared risk..

A special form of this commission business is scan-based trading whereas VMI

is usually applied but not mandatory to be used.

vendors benefit from more control of displays and more contact to impart

knowledge on employees;

retailers benefit from reduced risk

better store staff knowledge (which builds brand loyalty for both the vendor and

the retailer), and reduced display maintenance outlays

Manage and maintain forecasts

Analyze or handle forecasts or inventory exceptions

Maintain forecasts and inventory parameters set by trading partners

Interface with trading partners regarding new products and promotions


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Prepare various performance reports and respond to problems in real time

Perform timely order maintenance

.

When a distributor needs product, they place an order against a manufacturer. The

distributor is in total control of the timing and size of the order being placed. The

distributor maintains the inventory plan. The manufacturer receives electronic data

(usually via EDI or the internet) that tells him the distributors sales and stock levels. The

manufacturer can view every item that the distributor carriers as well as true point of sale

data. The manufacturer is responsible for creating and maintaining the inventory plan.

Under VMI, the manufacturer generates the order*, not the distributor. VMI does not

change the "ownership" of inventory. It remains as it did prior to VMI.

When the supplier places inventory at a customers location and retains ownership of the

inventory. Payment is not made until the item is actually sold. A VMI relationship may or

may not involve consignment inventory.


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RESEARCH METHODOLOGY

RESEARCH

Research is a process in which the researchers wish to find out the end result for a given

problem and thus the solution helps in future course of action. The research has been

defined as A careful investigation or enquiry especially through search for new

facts in branch of knowledge

RESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using,

which researcher has to use facts or information already available, and analyze these to

make a critical evaluation of the performance.

DATA COLLECTION:

There are two types of sources for data collection:

Primary sources: primary sources are the sources which are collected for the first

time. No primary data is used in this study.

Secondary Sources: secondary sources are the sources based on the data have been

done earlier.

1. The data are collected from the annual reports

2. Data are collected from the websites.3. Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS

Economic Order Quantity.

Safety Stock.

ABC Analysis.

FSN Analysis.

Linear Regression method.

Inventory turnover ratios.


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ECONOMIC ORDER QUANTITY:

MEANING

A decision about how much to order has great significance in inventory management.

The quantity to be purchased should neither be small nor big because costs of buying and

carrying materials are very high. Economic order quantity is the size of the lot to be

purchased which is economically viable. This is the quantity of materials which can be

purchased at minimum costs. Generally economic order quantity is the point at which

inventory carrying costs are equal to order costs. In determining economic order quantity

it is assumed that cost of managing inventory is made up solely of two parts i.e., ordering

cost and carrying cost. The cost relationships are shown in below figure.

FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY

(EOQ)

SAFETY STOCK:

MEANING

The economic order quantity formula is developed based on assumption that the demand

is known and certain and that the lead time is constant and does not vary. In actual

practical situations, there is an uncertainty with respect to the both demand as well as lead

time. The total forecasted demand may be more or less than actual demand and the lead

time may vary from estimated time. In order to minimize the effect of uncertainty due to

demand and the lead time, a firm maintains safety stock, reserve stocks or buffer stocks.

The safety stock is defined as the additional stock of material to be maintained in order

to meet the unanticipated increase in demand arising out of uncontrollable factors.

In simple it is tells about which is used to protect against uncertainties.


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Because it is difficult to predict the exact amount of safety stock to be maintained, by

using statistical methods and simulation, it is possible to determine the level of safety

stock to be maintained.

DETERMINATION OF SAFETY STOCKIf the level of safety stock is maintained is high, it locks up the capital and there is a

possibility of risk of obsolescence. On the other hand, if it is low, there is a risk of stock

out because of which there may be stoppage of production. When the variation in lead

time is predominant, the safety stock can be computed as:

Safety Stock = (Maximum Lead time- Normal Lead time) * Demand

SAFETY STOCK

The service level of inventory thus depends upon the level safety stocks. Large the

safety stocks, there is a lesser risk of stock out and, hence, higher service level.

Sometimes higher service levels are not desirable as they result in increase in costs,

thus, fixing up a safety stock level is critical. Using past date regarding the demand

and lead time data, reliability of suppliers and service level desired by management,

safety stock can be determined with accuracy.


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ABC ANALYSIS:

MEANING

The inventory of an organization generally consists of thousands of items with varying

prices, usage rate and lead time. It is neither desirable nor possible to pay equal attention

of all items.

ABC analysis is a basic analytical tool which enables management to concentrate its

efforts where results will be greater. The concept applied to inventory is called as ABC

analysis.

Statistics reveal that just a few items account for bulk of the annual consumption of the

materials. These few items are called A class items which hold the key to business. The

other items known as B & C which are numerous in number but their contribution is less

significant. ABC analysis thus tends to segregate the items into three categories A, B & C

on the basis of their values. The categorization is made to pay right attention and control

demanded by items.

FEATURES OF ABC ANALYSIS

A Class (High Value) B Class (Moderate Value) C Class (Low Value)1. Tight control on

stock levels

2. Low safety stock

3. Ordered frequently

4. Individual posting in

stores

5. Weekly control

reports

6. Continuous effort to

reduce lead time

Moderate control

Medium

Less frequently

Individual

Monthly control

Moderate efforts

Less control

Large

Bulk ordering

Collective posting

Quarterly control

Minimum efforts


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ADVANTAGES

This approach helps the manager to exercise selective control & focus his

attention only on a few items.

By exercising strict control on A class items, the materials manager is able to

show the results within a short period of time.

It results in reducer clerical costs, saves time and effort and results in better

planning and control and increased inventory turnover.

ABC analysis, thus, tries to focus and direct the effort based on the merit of the

items and, thus, becomes an effective management control tool.

FSN ANALYSIS:

All the items in the inventory are not required at the same frequency. Some are required

regularly, some occasionally and some very rarely. FSN analysis classifies items

into fast moving, slow moving, and non moving items


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Vendor Managed Inventory (VMI) process:

The basic Vendor Managed Inventory (VMI) process can be described in terms of the

following two steps: data communications and calculations, monitoring and reporting.

(A) Data Communications and Calculations

The VMI process starts with the customer sending a Product Activity Report. This report

contains demand information such as sales and transfers, along with inventory position

information such as on-hand, on-order and in-transit for the items that changed since the

last report.

The VMI software analyzes the data and creates recommended replenishment orders .

The recommendations are based on algorithms which use factors such as forecasts,

frequency of sale, and dollar velocity of sales. Ideally, these processes include:

o Periodic (e.g. weekly) review and calculation of order points and order

quantities based on movement data and special information such as

promotions, seasonality, etc.

o Frequent (e.g. daily) comparison of on-hand inventory to order point and

generation of recommended replenishment orders

The supplier's planner reviews the recommended orders and any exception conditions

before approving appropriate orders. The VMI system then sends:

o A Purchase Order to the supplier

o A Purchase Order Acknowledgment to the customer

(B)Monitoring and Reporting

When trading partners begin VMI, they start by agreeing upon objectives for:

o Inventory turns

o Fill rates (in-stock percentages)

o Transaction costs


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The system monitors actual activity with measurements against those objectives. The

system must report the same information to both the supplier and the customer so that the

process is highly transparent. Information should always be available to both parties on-

demand. Ideally, the VMI system should also provide exception alerts to both parties

when measurements get outside an acceptable range or when a problem with the data

appears.

VMI Processes in EDI based system

In EDI based system, a series of steps are required to complete the VMI process. Each

Step in this process is extremely important. Skipping or not completing any steps will

have a major impact on the success of your VMI program.

Step1- Senior Sponsorship:

Since the business paradigm is changing, senior management must make a firm

commitment to this new process. VMI must have senior management

sponsorship. It should be identified as a strategic objective and then

communicated throughout the organization. Senior management must commit to

the: costs involved, manpower needed for setup/maintenance and also the concept

of having someone else manage their inventory.

Step2-Employee Acceptance:

Get all employees to buy into the concept, especially the person currently

responsible for maintaining the inventory levels. Without their acceptance, your

program will never work. They must understand that VMI will not push them out

of a job. It will free up some of their time to allow them to be more productive in

other areas. Employee should be given a complete overview of what VMI willmean to the company and the reasons why its being done.


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Step3-Synchronize Files:

Synchronize the Distributors Product Files with the Manufacturers. This step

alone is one of the greatest benefits you will receive from VMI. Synchronizing

means that you must match the manufacturers product data with the distributors

product data. Are there old, obsolete items on the file? Are the correct product

numbers being used? Have new product numbers been properly communicated to

the distributor? Any time there is a change to the product catalog, the

manufacturer must share the data with their VMI partners. Your initial data

synchronization is extremely important as well as the ongoing synchronization

that will be needed.

Step4- EDI Testing:

Extensive testing of all EDI sets to be used. The manufacturer and distributor

must work very closely together to validate that the data is being properly

sent/received. For example: Does the Quantity on Hand

that is being received by the manufacturer match the Quantity on Hand in

Distributors stock? Is Quantity Sold being properly sent? You should check a

variety of items in different categories (A,B,C). EDI testing many take many tries

and adjustments before it is finally correct.

Step5- Acceptance & Measurements:

The Distributor must understand and agree with the Stocking Plan the

Manufacturer is creating. Even though the exact method may be a proprietary

method, the distributor should still have an understanding of how the plan is

calculated. This will help avoid the future question "Why did they send us this

product if we don't need it?"Additionally, predetermined Inventory Turns, Fill Rates and Service Levels

should be targeted. The Distributor should monitor their current performance for

comparison to later results. Both parties must agree upon the frequency of

replenishment (daily? once/twice per week?). The Distributor should have at least

one years worth of measurements prior to VMI for comparison to later results.


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Step6- POS History:

The Distributor sends the Manufacturer his POS (Point of Sale) History file,

usually 1-2 years (Disk or Email). This will allow the manufacturer to base the

inventory plan on direct sale data rather than data from the distributors past

ordering history. The format of the file must be compatible to the needs of the

manufacturer. Then the Distributor sends an EDI #852 All Item Refresh. This tells

the status and stock level of every item they have. MAKE SURE YOU VERIFY

BOTH SETS OF DATA!!! This is your last and most important validation point.

Note: The standard #852 only sends those products that had a change in position

since the last transmission (if no activity took place for that item, then the item

isn't sent). An #852 All Item Refresh sends every item.

Step7-

Distributor makes a sale and enters that transaction into their computer.

Step8-

On a daily/weekly basis the Distributor sends an #852 Product Activity. This

reports a change in position on any item since the last #852.

Step9-

The Manufacturer receives the #852 and updates the Distributors Stock Plan

.Once antemor Items have hit their Reorder Point (ROP), the Manufacturer

creates an Order.

Step10-

The Manufacturer sends out a #855 Purchase Order Acknowledgment to the

Distributor. This lets the distributor update their system with the newly created

PO. During the beginning of stages of your VMI partnership, it is important to

have the Distributor review the #855 and point out any problems.


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Step11-

The Manufacturer picks and ships the order and transmits a #857 Advance Ship

Notice. This tells the distributor exactly what is being sent and when its shipping.

Step12-

When the shipment is received, the Distributor transmits a #861 Receipt Advice.

This tells the manufacturer exactly what was received. The manufacturer can then

match this to his Purchase Order to determine any potential problems (mis-

shipped etc)

Step13- (optional)-

The Invoice is sent out via an #810. Payment by a #820...


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Vendor Managed Inventory (VMI): Benefits

VMI can have a number of benefits, including lowered investment in the supply chain

(due to better forecasting), JIT delivery and less overstocking) and greater inventory

turnover. Its primary benefit, however, is improved customer service due to fewer

stockouts and more optimal product mixes. Manufacturers and retailers also stand to

benefit from VMI, as it allows them to schedule production and transportation more

efficiently (including ordering raw materials), to observe end-user consumption and

general market trends more closely, and to develop closer ties with their customers.

In summary, Vendor Managed Inventory (VMI) has consistently provided significant and

numerous benefits to the Manufacturer, Retailer, Distributor, supplier and customer.

Manufacturers Benefits

Visibility to the Distributors Point of Sale data makes forecasting for the

manufacturer easier.

Promotions can be more easily incorporated into the inventory plan.

A reduction in Distributor returns due to improved ordering.

Visibility to Stock Levels helps to identify priorities - replenishing for stock or a

stockout. Before Vendor Managed Inventory, a manufacturer has no visibility tothe quantity and the products that are ordered. With VMI, the manufacturer can

see the potential need for an item before the item is ordered.

Retailer Benefits

Reduced inventory: This is the most obvious benefit of VMI. Using the VMI process, the

retailer is able to control the lead-time component of order point better than a customer

with thousands of suppliers they have to deal with. Additionally, the retailer takes on agreater responsibility to have the product available when needed, thereby lowering the

need for safety stock. Also, the retailer reviews the information on a more frequent basis,

lowering the safety stock component. These factors contribute to significantly lower

inventories.


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Reduced stock-outs: The retailer keeps track of inventory movement and takes over

responsibility of product availability resulting in a reduction of stock outs, there-by

increasing end-customer satisfaction.

Reduced forecasting and purchasing activities: As the retailer does the forecasting and

creating orders based on the demand information sent by the retailer, the retailer can

reduce the costs on forecasting and purchasing activities.

Increase in sales: Due to less stock out situations, customers will find the right product at

right time. Customers will come to the store again and again, there-by reflecting an

increase in sales.

Distributors benefits:

The goal is to have an improvement in Fill Rates from the manufacturer and to the

end customer. Also, a decrease in stockouts and a decrease in overall inventory

levels.

Planning and ordering cost will decrease due to the responsibility being shifted to

the Manufacturer.

The overall service level is improved by having the right product at the right time.

The manufacturer is more focused than ever in providing great service to the

distributor and the end customer.

Suppliers Benefits:

For the supplier, VMI results in increased profitability due to:

Increased sales Reduced operating costs

Stronger customer relationships

Improved visibility results in better forecasting: Without the VMI process,

suppliers do not exactly know how their customers are going to place orders. To

satisfy the demand, suppliers usually have to maintain large amounts of safety

stocks. With the VMI process, the retailer sends the POS data directly to the

vendor, which improves the visibility and results in better forecasting.


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Reduces PO errors and potential returns: As the supplier forecasts and creates the

orders, mistakes, which could otherwise lead to a return, will come down.

Improvement in SLA: Vendor can see the potential need for the item before it is

actually ordered and right product is supplied to retailer at right time improving

service level agreements between retailer and supplier.

Encourages supply chain cooperation: Partnerships and collaborations are formed

that smooth the supply chain pipeline.

As long as the supplier carries out its task of maintaining predetermined inventory

and avoiding stockouts, it will be able to lock in a VMI-supported customer for

the long term with or without a contract. This will produce a steady and

predictable flow of income for the supplier and reduce the risk that the customer

will switch suppliers (Switching would be too costly for the customer).

A VMI arrangement will allow the supplier to schedule its operations more

productively because it is now monitoring its customers inventory on a regular

basis. Furthermore, reductions in inventory will be achieved once the supplier

develops a better understanding of how the customer uses its goods over the

course of a year.

Customers Benefits

For the customer, VMI results in increased profitability due to:

o Reduced inventory/increased turns

o Reduced administrative costs

o Fewer stock-outs or shortages

o Increased sales (for distributors and retailers)

When the supplier can see that its customer is about to exhaust its inventory, the

supplier can better prepare to replenish the customer because the supplier can then

better schedule its own production/distribution. Customers will reduce/eliminate

stockouts because they will not have to reorder goods at the last minute without

knowing whether the supplier has the ability to restock without interrupting the


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customers operations. Therefore, part of VMIs goal is to reduce uncertainty that

arises when the supplier is blind to the customers inventory status.

Typical Benefits to Manufacturer/ Supplier Typical Benefits to Distributor /Retailer

Lower inventory investment (raw and

finished)

Better scheduling and planning

Better market information

Closer customer ties and preferred status

Fewer stock-outs with higher turnover

Better market information

More optimal product mixes

Less inventory in channel (transfer costs)

Lower administrative replenishment costs

DUAL BENEFITS TO SUPPLIER AND CUSTOMER:

Data entry errors are greatly reduced due to computer to computer

communications. The speed of the processing is also improved.

Both parties are interested in giving better service levels to the end customer.

Having the correct item in stock when the end customer needs it, benefits allparties involved.

A true partnership is formed between the Manufacturer and the Distributor. They

work closer together and strengthen their ties. This benefits of a stronger

partnership goes beyond VMI.

Stabilize the timing of Purchase Orders - PO's are now generated on a predefined

basis. Example: A once/twice Weekly purchase order cycle.

Vendor Collaboration: Other Benefits

Inefficiencies in the supply chain affect not only the retailer, but also the vendors that

supply the goods offered to consumers. Inaccurate or inaccessible data in the inventory

management system can lead to retailers ordering unnecessary products because they

don't know they have supply on hand or hinder a retailer from placing necessary orders


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when supplies are low. Leading retailers use business intelligence to collaborate with

their vendors to:

Reduce or eliminate the "bullwhip effect." The bullwhip effect is the distortion of

product demand signals generated by order batching, shortage planning and

reactions to price variations across the supply chain. Although retailers may open

access for vendors to monitor aggregated sales data on their products, vendors

typically lack visibility into fine-grained transaction-level demand at retail stores.

Providing vendors with insight into true demand reduces the necessary volume of

safety stock kept on hand.

Leverage economies of scale. Demand for product lines with constant variability

such as fashion items is inherently difficult to predict. By combining business

intelligence-based sales analysis with postponement (also known as delayeddifferentiation), the vendor can stock undifferentiated product in bulk and delay

specific labor to convert it into its final form until a dependable demand forecast

is available.

Make vendors responsible for managing inventory. Web-based BI applications

can allow selected external suppliers to access timely detailed demand

information for their products across all locations and channels, allowing vendors

to more accurately predict customer demand. Additionally, by providing

aggregated information pertaining to their competitors' performance, retailers can

foster competition between suppliers to proactively maintain shelf stock, virtually

eliminating costly out-of-stock and overstock situations.

BI-based vendor managed inventory systems (VMI) co-opt vendors into taking

responsibility for properly managing inventory levels at distribution centers and stores,

resulting in exponential value for both the retailer and vendors alike.

Supply Chain Efficiency

Business intelligence gives retailers the ability to gain access to enterprise-wide

information on the company's supply chain operations. This insight can help to improve

the accuracy of demand forecasts and increase the efficiency of the supply chain,


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reducing lead times, carrying costs, and operating costs across the enterprise. Retailers

can use BI to gain visibility within their supply chain by:

Scrutinizing detailed waypoint logs. Long order picking times may indicate

equipment maintenance problems or suboptimal routing. High error rates in

orders picked by a given operator can be symptomatic of insufficient training,

excessive distraction or defective identification mechanisms. Lessening the

amount of time spent locating specific items to fill orders can help to reduce

operating costs, increase productivity and optimize service levels.

Analyzing vendor and distribution center lead time and lead time variability.

Retailers can reduce the need for safety stock if they can identify bottlenecks in

their delivery system and reduce lead times for movement to the sales floor.

Measuring forecast accuracy. Retailers that more quickly identify products withforecasts that vary significantly from actual demand can reduce the possibility

that that product will experience an over-stock or out-of-stock position.

The aggregated effect of using business intelligence for supply chain optimization is a

reduced need for safety stock to avoid service interruptions, increased asset liquidity, and

easier access to available working capital.

Markdown Optimization

Business intelligence can be instrumental in both quickly identifying products that should

be discontinued or marked down and determining the most profitable way to sell through

poor performing merchandise. Combining item level plans with sales data allows retailers

to quickly identify items to be promoted, marked down, or sent to outlet stores. The

ability to react promptly to issues at item level enables retailers to avoid build-ups of non-

productive merchandise.

In addition, business intelligence can be used to determine the most efficient ways to sell-

through slow selling inventory. Retailers can use BI to identify the levels of discounts

that have worked in the past to liquidate similar merchandise. Alternatively, BI can also

be used to identify which locations have sold the product better or which sell markdown


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merchandise better so that broken assortments can be consolidated to the locations that

have the best opportunity to sell the merchandise more quickly or at a higher price.

Retailers who take advantage of business intelligence to improve markdown optimization

are able to spend less time determining merchandise to mark down and instead are

focusing their efforts and investments on more productive inventory.

The Benefits of Business Intelligence for Inventory Improvement

World-class business intelligence environments allow retailers to increase their visibility

into inventory management without hampering daily operations. By extracting

information from disparate source systems into a centralized repository such as an

enterprise data warehouse, retailers are concurrently reporting on metrics related to their

supply chain, sales, production and internal operations to make better, fact-based business

decisions. By utilizing a data warehouse that supports trending on both historical and

future operational metrics such as weeks of supply, sell-through, inventory turnover,

gross margin return on inventory and shrinkage, retailers can improve data quality and

accuracy, manage inventory levels to avoid lost sales or oversupply, provide external

vendors with increased visibility into product performance, and allow managers and

executives to make more timely decisions using a common set of data trusted across the

entire user community

Factors responsible for a successful VMI System

Although the basic concept of VMI is straightforward, successful deployment is not

necessarily easy. There are several keys to success:

Recognize that VMI is not for everyone

First, companies should recognize that VMI is not for everyone:


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o Suppliers and customers should only consider VMI for trading partners

that are important to them (e.g. reasonably high volume or growth

potential)

o Suppliers and customers can only do VMI with trading partners that have

reasonably solid basic operational capabilities (i.e. consistent warehouse

procedures and the ability to provide good data)

Understand That VMI is Collaborative

Second, VMI is different from a typical in-house information system or business process

improvement effort in that neither the supplier nor the customer can do it alone - they

must work together to make it happen.

o Both companies must have mutual trust, a fundamentally good working

relationship, and an environment that fosters collaboration.

Don't Underestimate the Importance of the VMI Operations Platform

Third, VMI requires a technology and operations platform that is:

o Designed around a deep understanding of inventory and supply chain

management

o More than just performing the right calculations.

o Designed with a solid understanding of issues like varying demand

patterns, different supply chain structures (e.g. hub & spoke vs. direct

store delivery), multi-location shipping & delivery, and many others.

o Built to facilitate consistent, effective communication between the

customer and supplier

o Provides common information to both parties so the process is transparent

(e.g. inventory turns and in-stock percentages)


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o Provides valid information so people will trust it (e.g. built-in processes to

ensure data quality)

o Exception-oriented so people can focus their efforts where action is

needed instead of wading through data (e.g.: highlight unusual demand,

suggested transfers, and items not sold)

o Managed to ensure reliable operation day-in and day-out.

o A data center with high availability using techniques such as redundancy,

fail-over, 24x7 management

o Communications management that monitors for expected transmissions,

automates re-tries, and alerts when down

o Skilled people ready to quickly resolve problems (e.g. transmission, data

format)

Leverage VMI Experience

Finally, trading partners committed to the success of VMI should look for a source of

experienced guidance and support, along with well-conceived implementation tools and

processes.

o People who have implemented VMI and use it regularly

o Project plans and tools that take the guesswork out of start-up

o Organizations committed to continually improving the process

o Professionals ready to provide support when things change, and help

whenever it is needed


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Six Steps to a Successful VMI System

now the question arises: how can one implement a successful VMI system? There are the

following suggestions:

1 COMMUNICATE expectations of all parties. Customers and suppliers must make

the effort to sit down and discuss the goals and objectives of implementing VMI. The

importance of this step cannot be overstated. Both parties hardware and software

requirements must be identified, and an understanding must be reached in terms of how

both companies systems will communicate. Then a plan for implementation must be

mapped, specifically identifying each partys financial and other responsibilities.

2 Customer must commit to sharing PRECISE information. Suppliers must have

visibility into the customers internal sales and inventory information. Without accurate

data, ability to quickly meet demand will be impaired.

3 Suppliers must ensure RELIABLE transmission, receipt, and use of information. To

facilitate step 2, the supplier must be able to guarantee that the customers trusted

information will be communicated, received, and utilized securely and thoroughly to

meet the designated needs. Time should be spent during the planning phase discussing

information precision and reliability.

4 Sufficiently TEST systems before going live. As with any new system, testing will

uncover any bugs or inefficiencies and can help to avoid future headaches.

5 Expect implementation to be a PROCESS not a project. Remember that there is no

on/off switch. Adjustments will have to be made as demand levels fluctuate, and no

system will be perfect 100% of the time.

6 Plan to spend sufficient TIME AND MONEY to make it work. Most successful VMIsystems weve read about took 2-2.5 years to put into operation, and cost hundreds of

thousands of dollars for IT and training. Spending (or finding) the time to create a

comprehensive system can be a challenge.


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Here are two compelling success stories about companies who have recently gone public

with their VMI successes.

1. ST Microelectronics N.V. and Hewlett Packard began using their well-planned

VMI system in the summer of 2001. Gilles Sanchez, STs supply chain concept

owner, said his company has cut product lead time in half, reduced buffer

inventory from five to two weeks, and eliminated 80% of manual transactions"

(3). Although the returns are terrific, it must be noted that HP and ST worked

together for two years to make the system succeed. They say their secret to

success was their ability to connect their incumbent IT infrastructures and build

off of the existing platform.

2. Sun Microsystems has also figured out how to make VMI successful, but also

spent two years in the planning phase. Half of its $350 million fiscal year

inventory reduction is a direct result of the new VMI system (the other half, they

say, is due to last years general drop in demand). Sun created a pull system with

its suppliers. When a customer places an order, a signal is sent to suppliers who

are expected to deliver replacement raw materials within four hours, or finished

goods within 24 hours. Sun provides suppliers weekly materials, six-quarterforecasts, and month-out views of actual PO data. Their key to success was

spending enough time planning with suppliers before moving to the

implementation phase.


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Controls:

The following are a list of potential controls that could be implemented to monitor

VMI systems:

1. At least at first and then periodically thereafter, the retailer should monitor

inventory levels to determine whether the vendor is sending enough

inventory to prevent stock outs but not too much inventory that is slow to

sell.

2. Analyze inventory costs. If VMI is working, then overall inventory costs

should decline.

3. Intrusion detection systems to determine if the vendor has compromised

the security of the retailers system.4. Unauthorized access attempts to non-VMI related areas of the retailers

system.

VMI'S POTENTIAL PROBLEMS

Successful VMI programs depend on several critical factors, some of which are not

immediately obvious. This has led to much confusion in the distribution and retail

industries, as suppliers and buyers have sought to implement VMI as the newestimprovement to their existing systems. VMI, while a logical outgrowth of EDI, Efficient

Consumer Response (ECR), Category Management (CM) and other programs, is

qualitatively different.

VMI depends upon the availability of solid and comprehensive consumer data (POS).

Without such "live" information, the benefits of VMI begin to become elusive. The

mfg/vend must understand the true nature of POS data and how the dist/ret is using the

stock that is ordered. While previously it was sufficient to know that X number of units

were ordered, under VMI, the supplier needs to know whether those units were being

inventoried (and for how long), whether they were special orders, if they were ordered

just to create full truck loads, the number of end users the units were going to, and so on.

Moreover, efficient inventory management and production scheduling requires close


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communication regarding promotions, seasonal variation, and new product introductions

and selling incentives that may impact the ability to forecast accurately. Thus, exceptions

communication must also be incorporated beyond the automated nature of data transfer

under VMI. Close supply chain communication is typically best addressed through

routine and ad-hoc conference calls, video conferencing, and email systems.

Problems with VMI

What makes VMI different from EDI and its other incarnations is that it passes

control of the supply chain as far up the supply chain as possible to support production

pooling and inventory minimization. Thus, VMI should only be implemented in cases

where the mfg/vend can forecast demand more accurately than the dist/ret. As pointed

out earlier, however, the competency to forecast and determine order levels is a learnedcapability. This indicates that supply chain partners should decide strategically who

should hold such responsibility, and then let that entity develop the competency. Making

inaccurate decisions in this area can lead to more problems. As well, change must

become quickly adopted as "tweaking" will become the norm not the exception.

Clearly, there are industries where the vagaries of consumer demand, local conditions

or market size dictate that the dist/ret should retain control of inventory management.

This was the case with K-Mart, which after reducing the number of vendors it worked

with and implementing VMI, discovered that its own buyers could do a better job of

forecasting consumer demand in certain circumstances. Some market conditions do not

make VMI the best solution and a tailored/hybrid approaches need to be explored.

Specifically, the "silver bullet" approach will lead to problems if organizations accept

VMI as an end-all solution.

One question that could not be resolved in reviewing the activities of many VMI

programs is for what type of products VMI will and will not work. This is a complex

question where high volume, high turn items, like disposable diapers, are popular

candidates because they are low hanging fruit, while "best of breed" organizations have

had success in other product types. Wal-Mart and P&G have had a VMI program

together for over ten years to manage the inventory and production of disposable diapers,


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with great success: turns doubled, Wal-Marts' operating costs fell, and P&G's market

share grew (because Wal-Mart gave it preferred shelf space). However, the opinion that

non-volatile, low-turn products would also benefit was also expressed, and none of the

reported failures revolved around the type of product included in the programs. This may

indicate an appropriate starting point to chose mfg/vends that have capabilities but also

that produce such products.

Additionally, the answer depends on a number of variables that need to be

considered, including:

What percent of their total volume do the VMI vendors sell through the dist/ret?

What capabilities do the vendors have in the area of forecasting or retail inventory

management?

How flexible will the system be in the event of required changes and

modifications?

Will there be minimum volume or exclusivity requirements? What product items

are being considered?

Another, more fundamental, problem with making vendors responsible for retailers'

inventories is the fact that mfg/vends traditionally want to push product (i.e., maximize

inventory), while retailers want to minimize inventory (i.e., optimize sales). Overcomingthis dichotomy requires trust that both parties are seeking long term profitability. The

dist/ret should also assure itself that the interests of the mfg/vend salespeople are aligned

with its own. Elements that need to be considered include:

How will the mfg/vends' salespeople be compensated?

How will special pricing and promotions be handled?

How will the benefits of VMI be split?

What dist/ret sales and volume data should be kept confidential?

What are the mfg/vends' other channels?


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As distribution systems become more sophisticated, the mechanical aspects of

providing outstanding service--whether its next day delivery or access to a broad network

of manufacturers--will become more accessible to all firms. Service, therefore, from a

distribution aspect, may not translate into a sustainable competitive advantage, however

knowing which products, in what quantities, and where to store them, may be.

OUTLOOK AND FUTURE OF VMI

Logistics experts have recently published the results of the annual logistics survey

that shows the acceleration of trends towards cycle time compression, reduced inventory,

increased inventory velocity and greater use of EDI. According to these researchers,

more industries are paying closer attention to supply chain management. The survey

results show that information technology and supply-chain management will most affectthe future growth and development of logistics. The results of the survey forecast an

increase in inventory turns, which survey respondents said will rise from 30% to 40% by

the year 2000. They also show that pooling of shipments is re-emerging as a Logistics

strategy (14.2% - '94, 17.8% - '96 and 27.5% -2000). This implies that companies are

becoming increasingly competitive in determining what inventory to carry while offering

quicker and more customized service. According to LaLonde, this can be attributed

directly to the application of VMI, which will increase from 4% of inbound shipments'. in

'94 to 19% by the year 2000.

According to another survey released by the International Mass Retail Association

(IMRA), VMI programs will grow substantially in the near future.1 Over 60% of hard

goods and almost 40% of soft goods are now under replenishment programs managed by

retailers. The survey projects very little growth beyond these levels. On the other hand,

respondents mentioned that VMI programs are intended to grow within their

organizations from insignificant levels today to 10% of volume in the next three years for

hard goods and about 7% for soft goods.


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CONCLUSIONS

From above we conclude that:

some companies continue to manufacture to stock without leveraging customer-

specific data effectively for production planning

In order to provide priority service to VMI partners, some vendors reserve

inventory resulting in shortages to other customers

Insufficient level of system integration results in incomplete visibility

High expectations from retailers

Resistance from sales forces due to concerns of losing control, effecting sales

based incentive programs

Lack of trust and skepticism from employees

Lower cost retailers are able to essentially outsource their inventory

management to their vendors.

Potentially reduced lost sales provided that the vendors are able to meet

product demand.

More accurate forecasts since vendors have more data from the retailers, they

are able to more accurately forecast and meet demand for their products.

Cost the retailers and vendors must expend the resources necessary to acquire

the technology and incur the costs of changing the organization to a VMI

arrangement.

Security The vendors have significant access to retailer data. The retailer puts

one of their most valuable assets, their sales data, in the hands of their vendors.

Such access opens the door to a myriad of data and system security issues such as

data alteration and deletion, unauthorized access to non-sales related data,

inadvertent loss of data or even corporate espionage.

Over supply the vendor could ship more inventory than the retailer needs tomeet demand.


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SUGESSTIONS

Effective implementation of VMI depends on smoothly overcoming the limitations and

addressing the concerns of various stake holders. Some of the concerns can be addressed

as explained below:

Redefine incentive programs based on partnership building instead

of sales volume

Build strong partnerships with management commitment to

effective communication, active sharing of information,

commitments to problem solving and continued support

Conduct simulations and pilots before actual implementation

Organize training sessions before launching VMI program

Set reasonable targets for benefits of VMI

Establish agreements on service levels and process to handle

exceptions


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Appendix A

VENDOR MANAGED INVENTORY AGREEMENT

(A draft of agreement signed for VMI between two parties)

This Agreement is entered into on ________________ 2011 between (Name of the

company with address) and, a _____________________________

Corporation with offices at ______________________________________ (Buyer).

1. Scope. Buyers orders and purchases from (Name of the company) are governed

by (Name of the company) Terms and Conditions, which appear on (Name of the

company) quotations, packing slips, invoices and at website: _________________,

(Name of the company)Terms and Conditions are incorporated into and form a part of

this Agreement as if set forth at length herein. This Agreement contains the provisions

governing Buyers requests for a consignment program. As used in this Agreement, the

terms Vendor Managed Inventory or VMI will mean the inventory of consigned

Products.

2. Vendor Managed Inventory. Buyer will provide (Name of the company) with

monthly rolling forecasts. If Buyers forecasts are accepted by (Name of the company), ______will make reasonable commercial efforts to schedule orders and deliver to

Buyers Facility a quantity of Products sufficient to meet Buyers forecast requirements.

Buyer, without charge, will provide within Buyers Facility a secure and segregated

location which meets applicable environmental and electro-static discharge specifications

for storing and handling the Products, and trained personnel to handle the Products. If at

the end of any sixty (60) day forecast period the quantity of Standard Products forecast to

be required for such period is in excess of the quantity purchased for such period, then

(Name of the company) will have the right to require return of such excess quantity from

VMI. If at the end of any sixty (60) day forecast period the quantity of Non-Standard

Products forecast to be required for such period is in excess of the quantity purchased for

such period, then Buyer will accept immediate delivery of such excess quantity from

VMI and Buyer will be liable to purchase and pay for same. Standard Products which are
http://www.em.avnet.com/http://www.em.avnet.com/


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returnable will be returned in unused, factory-shipped condition, with seals intact, within

the expiration date, if any, and in original manufacturers shipping cartons complete with

all packing materials.

3. Title and Risk of Loss or Damage. Ownership and title to Products in VMI will

remain with (Name of the company) . Notwithstanding the foregoing, Buyer will be

responsible upon delivery of the Products to Buyers Facility for all risk of loss or

damage to the Products from any cause, including shrinkage in quantity, theft, pilferage,

deterioration, casualty loss, or determination that the Products are not in resaleable

condition due to use or handling or conditions under which the Products were stored.

Title to the Products shall pass to Buyer upon removal of the Products from the VMI.

Buyer will not cause or permit any lien, levy, attachment or judicial process to be

imposed on the VMI and Buyer will give Avnet immediate notice if any is imposed.Buyer will be deemed to have purchased the Products and the Products will become non-

returnable upon the earlier of: (i) upon the breaking or removal of the seal of the bag, rail

or container in which the Products are packaged; or (ii) the transfer, disposal or use of

the Products by Buyer; or (iii) loss, quantity discrepancies, or damage to the Products

from any cause determined by an inspection of VMI performed by either party. Buyer

will be deemed to have converted the Products in the event of: (i) the imposition of any

lien, levy, attachment or judicial process on the VMI; or (ii) Buyers failure to return on

request all or any part of the VMI in accordance with this Agreement. Buyer agrees to

execute on request, and Buyer hereby authorizes Avnet to execute on Buyer's behalf, a

UCC-1 Financing Statement for informational purposes only and not to grant or create

any security interest in the Products. Buyer will purchase the Products for its own use and

will not otherwise transfer or dispose of the Products without the prior written consent of

Avnet. Buyer will not remove the Products from Buyers Facility without Avnet's written

consent. (Name of the company) reserves the right at any time to require Buyers

immediate return of any or all Products in VMI.

4. Purchases by Buyer. Buyer, on a weekly basis, will provide (Name of the

company) with a detailed report showing for the preceding week the inventory balance of

Products in VMI and purchases of Products. (Name of the company)will invoice Buyer

for all purchases during the period covered by such invoice.


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5. Insurance. Buyer will obtain and keep in force during the term of this

Agreement: (i) a policy of fire and extended coverage insurance with an all risk

endorsement insuring against loss or damage to the Products in the amount of the full

replacement cost thereof; (ii) workers' compensation insurance; (iii) commercial general

liability insurance covering bodily injury, death and property damage with a combined

single limit of one million dollars ($1,000,000); and (iv) employee fidelity insurance.

Such insurance will: (i) name (Name of the company) as an additional insured; (ii) be

written on an occurrence basis as a primary policy by insurance companies reasonably

acceptable to (Name of the company); and (iii) will provide for thirty (30) days notice to

(Name of the company) in the event of cancellation or material change. Certificates

issued by the insurer evidencing such policies will be delivered to (Name of the

company) prior to the delivery of any Products under this Agreement and thereafter at

least ten (10) days prior to the expiration or renewal of such policies. The amount and

coverage of such insurance will not limit Buyers liability nor relieve Buyer of any

obligation under this Agreement.

6. Inspection. (Name of the company) will have the right to enter Buyer's Facility to

inspect the VMI or to perform an inventory of the VMI at any time during Buyer's

regular business hours.

7. Term and Termination. This Agreement is effective on the date set forth above

and will continue until terminated. Either party may terminate this Agreement at any time

without cause by giving thirty (30) days prior written notice to the other party. Either

party may terminate this Agreement immediately for cause by giving written notice to the

other party in the event the other party: i) becomes insolvent or unable to meet its

obligations as they become due or files or has filed against it a petition under the

bankruptcy laws; or (ii) ceases to function as a going concern or to conduct its operations

in the normal course of business; or (iii) assigns or transfers, either voluntarily or byoperation of law, any rights or obligations under this Agreement without consent of the

party seeking to terminate; or (iv) effects any material change in its management or

ownership; or (v) fails to perform any obligation under this Agreement within ten (10)

days after written notice thereof. This Agreement may also be terminated by Avnet for

cause immediately by giving written notice to Buyer in the event Buyer: (i) removes the


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Products from Buyer's Facility for any purpose other than for its own use; or (ii) fails to

provide Avnet with evidence of insurance as required pursuant to this Agreement or

cancels or allows to lapse such policies of insurance.

8. Effect of Termination. Upon termination of this Agreement, Buyer will return

any Standard Products in VMI or delivered or in transit to Buyers Facility as VMI or, if

requested by (Name of the company) , Buyer will assemble and make all such Standard

Products available for return at a location designated by (Name of the company) . In the

event that Buyer fails to do so, such Standard Products will be deemed converted and

(Name of the company) will have all rights and remedies of an owner to recover

possession of its property under applicable Federal and state law, all of which rights and

remedies will be cumulative and may be exercised successively or concurrently. The

foregoing is without limitation or waiver of any other rights or remedies available to(Name of the company) . Buyer agrees to pay the reasonable attorney's fees and expenses

incurred by Avnet in exercising its rights or remedies hereunder. Notwithstanding

termination of this Agreement, Buyer will be liable to purchase and pay for all Non-

Standard Products ordered for VMI. All freight charges associated with any returns or

recovery of Standard Products will be paid by Buyer.

9. General.

(a) (Name of the company) and Buyer are independent contractors. Neither (Name

of the company) nor Buyer will be considered an agent of the other for any purpose and

nothing in this Agreement will be construed to allow either party to make any

representation or warranty on behalf of the other.

(b) The terms of this Agreement are proprietary and confidential. Neither party

will disclose the terms of this Agreement except as required to perform their obligations

hereunder.

(c) Any notices under this Agreement will be sent by certified or registered mail,

return receipt requested, or by recognized overnight courier, to the party to be notified at

its address set forth above. Notices to (Name of the company) will be sent to the

attention of: Director of Customer Contracts.


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(d) If there is any inconsistency between this Agreement and (Name of the

company)s Terms and Conditions, this Agreement will control.

10. Entire Agreement. This Agreement contains the entire understanding of the

parties and supersedes all prior agreements between the parties with respect to the subject

matter hereof. Changes to this Agreement must be in writing and signed by duly

authorized representatives of the parties. The parties represent and warrant the persons

signing below are expressly invested with the requisite authority to bind their respective

corporations in such matters.

This Agreement is duly executed as of the date first set forth above.

(Name of the company)

By: By:

Name: _____________ Name:

Title: _____________________ Title:________________________________

Date: Date:


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BIBLIOGRAPHY

WEBSITES

www.vmi india.in.com

www.wikipedia.com

www.tata cosultancy.com

REFERENCES

SD, VMI (Outlook and future ) Publications(7th Revised Edition),Pg-136-153

Banerjee -Challenges and VMI Models (2nd Revised Edition),Pg. 18.6-18.56


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