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Thursday, April 15, 2010

Inventory Control: Vendor Managed Inventory

When using google I have found a funny picture about Vendor Managed Inventory (VMI):


But what does it tell us? What is Vendor Managed Inventory?

According to 12manage VMI is a supply chain practice. The inventory is monitored, planned and managed by the vendor as ordered by the consuming firm. It is "based on the expected demand and on previously agreed minimum and maximum inventory levels."

On it is explained in similar words. For them VMI means to have an optimized Supply Chain with higher performance in which the manufacturer is responsible for maintaining the distributor’s inventory levels. It can be reached by giving the manufacturer access to the distributor’s inventory data and by making him responsible for generating purchase orders.

Inventory Control & Just-in-Time

As I have studied Computer Science before, I know the information technology company Dell Inc:

According to their website Dell is an American company selling information technology products such as Desktops, Servers, Notebooks, Netbooks, Televisions, Scanners and others. It is one of the biggest companies in the U.S. and they are "the preferred desktop and laptop provider of enterprises in the US". Moreover, they have been the "No. 1 PC supplier to small and medium businesses in the United States for 10 years in a row".

I have often heart about their just-in-time manufacturing process but I have never learnt about it. I would finally like to take the chance to have a look at Just-in-Time Inventory Control and how Dell manages to build its computers just in time.
I will start with an introduction to Just-in-Time:
Sometimes it is a good idea to have a look at Wikipedia (

They say that Just-in-Time is an
inventory strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs.

An "inventory strategy" is a way of viewing inventory and how it relates to management.