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Free Articles From The Current Issue
Who keeps the engines of global commerce running?Although what supply chain professionals do every day impacts commerce everywhere in the world, their role in corporate success and competitiveness generally has remained in the background.
Emerging consumer markets: the new drivers of global economic growth
Consumption is still largely concentrated in North America and Western Europe, but consumers in emerging markets are stepping onto the world stage in greater numbers.
Global trade trends down as local consumption slowly grows
Global trade levels declined by 1.3 percent in Quarter 3 of 2011 while domestic consumption continued to grow.
Time to come home?
To offshore, nearshore, or "reshore"? A total cost of ownership (TCO) analysis can answer that question. For some companies, TCO analyses are suggesting that manufacturing close to the point of consumption is the best choice.
A hard look at the soft side of performance
Supply chain scorecards typically focus on operational metrics. But if companies want to capture a true picture of supply chain success, they need to measure employees' interpersonal performance, too.
Most Read Articles
Time to reconsider VMI?
I first wrote about the concept of vendor-managed inventory (VMI) back in the 1980s. That original article described how a major U.S.-based snack-food company maintained its own inventory at each store operated by a well-known grocery chain. The snack-food manufacturer took responsibility for monitoring stock levels on the assumption that it was in its own interest to keep adequate stocks on the grocer's shelves and thereby minimize lost sales. Each day, therefore, a deliveryman would show up at the stores to restock the shelves and arrange the displayed items to catch the consumer's eye.
Since then, the practice of vendor-managed inventory has spread throughout the retail and grocery industries, and even into other sectors like the gasoline retail business. Moreover, most big-box retailers employ this practice with many of their key suppliers today.
But many consumer packaged goods (CPG) manufacturers now are starting to rethink the value of vendor-managed inventory. "I've been to probably 50 CPG companies in the last couple of years, and I cannot think of one that is interested in increasing its VMI base," Robert F. Byrne, chief executive officer of the software vendor Terra Technology, told me recently.
In fact, Byrne said, he knows of many companies that are cutting back on their use of VMI, and even of one multinational CPG company that's planning to stop rely on point-of-sale data to get a the practice altogether next year. Why the change? "The basic feeling is that VMI is too expensive [in comparison to] the benefits," he said.
A successful VMI program depends on accurate forecasts of consumer demand, which have proved elusive. Instead of vendor-managed inventory, most CPG manufacturers would rather clearer picture of what inventory should be on hand to meet demand. The demand signal or point-of-sale information gleaned from the cash register would drive replenishment as well as store-level inventory holdings. The adoption of this approach would allow for automatic replenishment of store merchandise— "something that never worked in VMI," Byrne said.
Vendor-managed inventory places the burden squarely on the manufacturer. As more manufacturers work to tighten up production and reduce their inventory holdings in these trying economic times, they will be looking for more help from their retailer customers... or at least more access to their data. It will be interesting to see to what extent retailers will be willing to share that data with their suppliers.
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