VENDOR MANAGED INVENTORY:
As the name suggests, VMI stands for Vendor Managed Inventory. VMI involves a collaborative and continuous inventory supply owned, managed and replenished by the Manufacturer right up to the last stocking point or point of sale to end customer.
VMI concept is widely being used by companies both as procurement business model and FG supply chain model too. Industries like retail supermarkets, consumable supplier industry, electronic hardware industry and Automotive Components industries have adopted these strategies effectively to improve their supply chain efficiencies.
VMI concept aims to reduce inventory in the pipeline, besides achieving the concept of JIT - Just in time where in the ownership of the inventory lies with the supplier until the time of usage or sale where it gets transferred to the buyer. This model also reduces operational costs of logistics and inventory management for the buyer.
INVENTORY COST :
Inventory procurement, storage and management is associated with huge costs associated with each these functions.
Inventory costs are basically categorized into three headings:
- Ordering Cost
- Carrying Cost
- Shortage or stock out Cost & Cost of Replenishment
- Cost of Loss, pilferage, shrinkage and obsolescence etc.
- Cost of Logistics
- Sales Discounts, Volume discounts and other related costs.
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