Question

1. Briefly explain how artificial variability hinders smooth flow scheduling.
2. How does SCM support the quality, delivery, and flexibility competitive priorities?
3. Explain the benefits of a vendor-managed inventory (VMI) system for the supplier and for the customer.

Answer 1

Benefits of VMI for suppliers:

• More Control: VMI gives more control so they can accurately forecast demand. As a result, production can be more efficient. They can practice lean manufacturing and make frequent deliveries, Also, VMI reduces stock levels, and decrease stock shortages, Moreover, vendors using VMIwill have total visibility in to their customers inventory levels.
• Strengthen Customer-Vendor Relationships: Suppliers are able to develop stronger relationship with their customers through better quality service. Vendors in VMI will become more valuable suppliers. In turn, this will increase the strategic communicaion. VMI can provide major benefits for both parties.
• Reduce Inventory Cost: Since VMI gives vendor control, they can eliminate wastages, non-value addin factors, and other costs. Accurate planning cuts the cost of store excess inventory and reduces obsolete stock. More importantly, vendors are able to eliminate stock shortages and the high delivery of costs to ship expedited orders

Benefits of VMI to Customers:

• Reduced Inventory Overstocks and Stock Shortages: As mentioned, VMI can reduce overstocks and stock shortages. As a result, they are reducing the factors that cause uncertainity. Not having the right products in stocks can be a big problem for customers. Moreover, this can be costly. Sales will be lost from stock shortages and overstocked items will have storage costs.
• Increase Sales: VMI can increase sales by ensuring products are always in stocks and available for purchase. Product availability will boost the quality of customer service and create brand loyality. As a result, this means more returning customers and sales over time.
• Less Responsibility: Typically, a vendor's customers are distributors or retailers. They are often recieving from hundreads of different suppliers and many different locations. For this reason, it is hard to keep track of inventory moving in and out. This is where VMI comes in to defer responsibility. It lowers costs, reduces admin work, and allow them to focus their efforts on other areas within their business.

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