(Mberiah Only) LOG302: Inventory Management

Module 1 - Background

Inventory Management

The background readings for the module will give you key insights into inventory management practices and their implications to optimizing the supply chain. Please read each article after you have reviewed the case and SLP assignment information.

Required Materials

The following article provides basic information on the importance of efficiently managing inventory turnover for an organization:

Schreibfeder, J. (n.d.). Why is Inventory Turnover Important? Effective Inventory Management, Inc. Accessed Nov 30th, 2012 at

http://www.industrialsupplymagazine.com/pages/Management---Why-is-inventory-turnover-important.php.

Abstract:

How hard is the money you have invested working for you? You’ve probably been asked that question several times by stock brokers or "investment counselors." No, I’m not going to try to sell you mutual funds. This article isn’t about how you are managing your personal investments. Instead, we are going to look at the performance of your company’s largest asset: inventory

The following three articles related to Vendor Managed Inventory are used in the case study:

Saxena, Rajiv (2009 Jul) Vendor Managed Inventory, Industrial Engineer, Norcross: Vol. 41, Iss7, pg. 20

Abstract:

Vendor-managed inventory (VMI) is a practice that makes a company's suppliers and vendors responsible for the flow of their goods to that company's plants, warehouses or retail locations. Many companies whose vendors provide VMI swear by its efficacy. Despite VMI's growing popularity and potential advantages, it is not a one-size-fits-all solution. Unless companies' suppliers have access to the same kinds of volume discounts, industry relationships, experience and engineering tools as companies have in-house, companies that enter into VMI relationships could essentially be losing some logistics ground and paying the price in terms of lower efficiency, diminished reliability and higher transit costs

Wheatley, Malcom (2008 Apr) Automating Vendor Managed Inventory in the Ultracompetitive Papermaking Industry, Manufacturing Business Technology, Highlands Ranch: Vol. 26, Iss. 4, pg 20

Abstract:

Korsnäs AB makes the specialty board and papers used in packaging liquid and food products. Papermaking at the moment is an intensely competitive industry. In fact, Korsnäs says competition within its carton board segment is higher as a result of imports from low-cost countries like Brazil and Chile, the weakened state of the U.S. dollar, and increased production capacity inside and outside Europe. This explains the interest Korsnäs' took in an imaginative vendor managed inventory (VMI)-based trading relationship offered by Eka Chemicals , a Bohus, Sweden-based provider of chemicals used in papermaking for bleaching, sizing, and coating processes. Today a diverse group of Eka Chemicals customers in Europe, North and South America, and Asia are making use of the company's VMI offering

Brand, David (2009 Sep) Supply Chain Dream Comes True, Industrial Engineer, Norcross: Vol. 41, Iss. 9, pg. 52

Abstract:

Aerospace and industrial business sectors, in particular, search for many methods to keep costs low despite varying operation needs and configurations that could number between a dozen to tens of thousands of frequent changes. Interfast has developed many supply chain system offerings since beginning its own lean journey in 1996. Richard Michaud, director of materials management programs for Toronto-based Interfast Inc, a global distributor of aerospace and industrial fasteners, said the company started then with a focus on vendor-managed inventories (VMI), but today, Interfast uses lean tools to integrate within a customer. Its delivery solutions include custom kitting, subassembly, VMI, customized inventory management and bin replenishment -- each designed to meet quality, timing and cost expectations. As Interfast contributes to its customer-driven supply chain progress and cost reductions, it must also keep an eye on success rates and areas of improvement. Michaud said customers continuously need to take cost out of their systems

The following two articles provide additional information on Vendor Managed Inventories and Vendor Owned Inventory Management solutions applied to aircraft manufacturing and retailing:

Micheau, Victoria A. (2005 Spring), How Boeing and Alcoa Implemented A Successful Vendor Managed Inventory Program, The Journal of Business Forecasting, Flushing: Vol 24 Iss. 1; pg. 17, 3 pgs.

Abstract:

Boeing's Skin and Spar facility enjoys a relationship with its raw material supplier, Alcoa, which pays off big for both companies. The pay off came about through a comprehensive restructuring of the supply chain. The implementation of vendor managed inventory for the raw material is the result of Boeing and Alcoa working together to solve their forecasting and delivery problems. Implementing VMI has also been the catalyst for considerable change in many areas of the supply chain. This article addresses the co-sponsored process to implement VMI, with the objective to improve the forecasting process. It reviews 4 areas: 1. How the process was developed. 2. Key factors in implementation. 3. Process outcomes and results. 4. Valuable lessons learned.

Rungtusanatham, Manus, Elliot Rabinovich, Bryan Ashenbaum, Cynthia Wallin (2007), Vendor-Owned Inventory Management Arrangements in Retail: An Agency Theory Perspective, Journal of Business Logistics, Oak Brook: Vol. 28, Iss 1: pg 111.

Abstract:

This paper undertakes two related tasks to augment current understanding regarding vendor-owned inventory management (VOIM) arrangements implemented in the retail industry. The first task formally juxtaposes three prevalent forms of VOIM arrangements (i.e., Consignment, Pay-On-Scan, and Scan-Based Trading) to one another and identifies three dimensions (i.e. Relevant Data Visibility, Timeliness of Information Release, and Shrink Responsibility) that serve to discriminate among them. The second task applies an Agency Theory lens to uncover differing profiles of characteristics underlying the retailer-vendor relationship across the Consignment, Pay-On-Scan, and Scan-Based Trading arrangements. These conceptual results contribute to and have implications for the science and practice of VOIM arrangements in the retail industry.