Examples of how companies can implement inventory management strategies in the supply chain

Enterprises need to produce products, raw materials, components, purchased parts, auxiliary materials and tools and equipment supply, marketing needs to store a certain amount of goods to meet the customer's purchasing needs, day-to-day operations also need to have the right amount of office supplies. Therefore, enterprises must have a certain amount of inventory to protect the business operations. However, for a long time, the circulation of inventory is separate. Each department in the distribution chain manages its own inventory, retailers, wholesalers, suppliers have their own inventories, and each supply chain segment has its own inventory control strategy. Since their respective inventory control strategies are different, various problems inevitably arise, such as the phenomenon of distortion of demand, the so-called demand magnification phenomenon, which inevitably generates the bullwhip effect. While it is understandable that each organization in the supply chain independently seeks to protect its respective interests in the supply chain from unintended disruptions, it is not desirable. Because the result of doing so affects the optimal operation of the supply chain, it cannot achieve the goal of minimizing the overall cost of the supply chain, and it cannot form a strong competitive edge, and it cannot survive in the fiercely competitive market environment at home and abroad.

Therefore, enterprises in the supply chain environment must rationalize the control of inventory in order to improve the competitiveness of the supply chain members, the following is a specific analysis of the case of Carrefour.

VMI is an important logistics operation mode of QR system, which is also an important symbol for QR to move to the advanced stage. The core idea of VMI is that retailers give up the right to control the inventory of commodities, and the suppliers master the inventory movement of commodities in the supply chain, i.e., the suppliers centralize the management of the inventory based on the daily sales information and inventory provided by the retailers, and place the orders or continuous replenishment for the retailers, so as to achieve a high level of customer satisfaction and to improve the competitiveness of the supply chain. VMI can not only significantly improve the operational efficiency of the QR system, i.e. accelerate the response time of the entire supply chain to the market, and learn the accurate sales information of the market at an earlier time; but also minimize the logistic cost of the entire supply chain, i.e. reduce the unnecessary inventory of the suppliers and retailers due to the changes in the market, so as to achieve the purpose of tapping potentials and increasing efficiency, and to save money and reduce expenses. The purpose of opening up new sources of income and cutting down on expenses.

It is precisely because of the above special effects of VMI that Carrefour has been trying to find a suitable strategic partner to implement the VMI program after introducing the QR system. After careful selection, Carrefour finally chose its supplier Nestle. As far as the existing relationship between Carrefour and Nestle is concerned, it is purely a buyer-seller relationship, with the exception that Carrefour is an important retailer customer for Nestle. In their business dealings, Carrefour has full decision making power on which products to buy and in what quantities. Free Essay on Inventory Control Strategies. After consultation between the two companies, it was decided that Nestle would establish the mechanism for the entire VMI program, with the general objectives of increasing the efficiency of the supply of goods, reducing Carrefour's inventory days, shortening the order lead time, and reducing the cost rate of logistics operations for both parties. As each side has an independent summary of what to give him, and even as far as possible to promote the product, each other have ignored the real market demand, resulting in good selling goods are often out of stock, while not selling goods have a lot of inventory. This cooperation makes both parties willing to **** with the problem, which is conducive to fundamentally improve the overall operational efficiency of the supply chain, and makes it easy for Nestle to grasp Carrefour's sales information and inventory dynamics, in order to better forecast market demand and take effective inventory replenishment program.

From the case of Carrefour, it can be seen that Carrefour could not use the VMI program before the introduction of QR, so there are the following five aspects of inventory in the supply chain management environment.

1. Inappropriate understanding of user services and untimely delivery status.

The understanding and definition of the user's service varies, resulting in differences in the level of user service, many companies use the order fulfillment rate to measure the level of user service, but the user fulfillment rate is not equal to the user satisfaction rate.

2, the lack of accurate delivery status information

When customers place an order, they always want to determine when they can deliver, waiting for the delivery process, but also may be on the order of delivery status modification, especially when the delivery is delayed, many companies due to the problem of the information transfer system, did not delay the delivery of the order delivery of the modification of the data provided to the user, and the result is of course, resulting in the user dissatisfaction. User dissatisfaction.

3, lack of cooperation and coordination

Vendor Managed Inventory VMI (Vendor Managed Inventory) for the higher requirements of inter-enterprise trust. VMI is the integration and coordination of cross-border, requiring the supply and demand sides to establish a partnership of mutual trust. If there is a lack of trust between enterprises, both sides regard each other as competitors rather than partners, it is impossible to realize information ****sharing and inter-enterprise integration and coordination. Mutual trust and cooperation between supply and demand is a necessary condition for the success of VMI. Each node of the supply chain enterprises, in order to cope with uncertainty, have a certain amount of safety stock, which is a kind of contingency measures taken by the enterprise, the enterprise has to maintain a high level of safety stock, thus paying a high price. Due to market demand changes, price factors, inventory risk and other reasons, enterprises at all levels of the supply chain for insurance purposes, have set up buffer stocks, which leads to demand information in the supply chain has been amplified step by step, resulting in the "bullwhip effect", and ultimately lead to the supply chain of invalid inventory increase.

4, inefficient information transfer system

Currently, many enterprises' information system is not well integrated, when the supplier needs to understand the user's demand information, often get the delayed information and inaccurate information. The implementation of short-term production planning also encounters difficulties because delays cause errors and affect the accuracy of inventory levels. Free Essay on Inventory Control Strategies. For example, in order to formulate a production plan, an enterprise needs to obtain information about demand forecast, current inventory status, transportation capacity for ordering, production capacity, etc. This information needs to be obtained from the database inventory of enterprises at different nodes of the supply chain, and the workload of data calling is very large. After the data is organized, the master production plan is formulated, and then the related management software is used to formulate the Material Requirements Plan (MRP), which is a process that generally takes a long time. The longer the time, the greater the forecast error, the manufacturer's ability to respond effectively to the latest order information is also less, resulting in the production of obsolete products and high inventory.

5, inventory control strategy simplicity

The purpose of inventory control in any business is to ensure the continuity of supply chain operations and cope with uncertain demand. Understanding and tracking the uncertainty state factors is the first step, the second step is to use the tracked information to develop appropriate inventory control strategy. This is a dynamic process because uncertainty is constantly changing, and many companies use a uniform inventory control strategy for all items, where items are categorized in a way that does not reflect the uncertainty in supply and demand. In the traditional inventory control strategy, most of which is oriented to a single enterprise, the information used is basically from within the enterprise, and its inventory control does not reflect the idea of supply chain management.

Aiming at the above problems, Carrefour has been trying to find a suitable strategic partner to implement the VMI program after introducing the QR system. Vendor Management Inventory This method breaks the traditional respective inventory management mode, embodies the integrated management idea of supply chain, adapts to the requirements of the market, and is a new representative inventory management idea.

1, the basic idea of VMI

Traditionally, the inventory is owned by the inventory management, inventory setup and management is done by the same organization. This inventory management model is not always optimized. Different organizations in the supply chain operate independently according to their own needs, which can lead to duplication of inventory construction and thus fail to achieve the lowest cost.VMI is able to break through the traditional compartmentalized inventory management model, and manage inventory with a systematic and integrated management idea, so that the supply chain system can obtain synchronized ground operation.

2. Benefits of implementing VMI

The success of supply chain inventory management usually stems from the realization of better service levels at lower inventory costs.

(1) Cost reduction. The volatility of demand is a major problem for most supply chains. Many suppliers are attracted to VMI because it moderates demand uncertainty. The rare large order forces the producer to maintain spare capacity or excess inventory of finished goods, which is a costly method of ensuring responsiveness to customer requirements. Free Essay on Inventory Control Strategies. the VMI can erode the gap between peaks and valleys of production, allowing for small capacity and inventory levels.

(2) Improving service. Retailers believe that good service is often measured by product availability. This comes from the very simple idea that when a customer walks into a store and the product they want is not available, the sale is lost. The result is quite serious, because the "cost" of losing a leapfrog deal can be the loss of "credibility". So. When planning, retailers want suppliers to be trustworthy and reliable. In VMI, coordination between multi-user replenishment and delivery greatly improves service levels. In addition, VMI can make it easier to update products, new products will be on the shelves faster.