VMI practice of third-party logistics business
VMI is the third-party logistics service provider in the 1-2 hour drive from the location of the production establishment of a public warehouse, from third-party logistics service provider for vendor managed inventory business model. Can Shui, which is a cooperative strategy, to manufacture and supply of commercial Shuang Fang Du Shang obtain the lowest cost for the Mudi, the agreement in a common third party instead of You VMI, Touguobuduan monitor compliance Hu Xiu Zheng agreement, so that inventory management has been continuous improvement.
VMI mode of conduct in specific business is divided into two forms. First: store the goods in a public warehouse provider for all property belonging to the manufacturer decided in consultation with the supplier inventory levels and continued replenishment strategies, according to the actual production volume for JIT delivery and use of safety stock replenishment, third-party Logistics service providers only provide VMI / JIT logistics services. Second: Third-party logistics service providers and joint procurement of suppliers to sign the tripartite joint purchase and sale agreement, first by the third party logistics providers in cash or bank credits to buy products supplier to ease financial pressure on suppliers, and then directly to the first identity of the supplier will own warehousing and order management systems and production systems manufacturer docking, while providing customers with warehouse management services supporting VMI and JIT logistics and distribution services.
VMI Services
Third-party logistics service providers with well-known manufacturers in the region and its major suppliers to establish strategic cooperative partnership, according to the characteristics of the industry in customer timely innovation, thus establishing VMI services influential brand. Its main services include: Supplier product set goods, raw materials inventory management, rolling stock and safety stock programs to remind, homogeneous set of picking / JIT delivery, VMI information systems generate real-time inventory queries and reports, implementation services, procurement, logistics and value-added services .
Customer benefits
“VMI / JIT” services can effectively help buyers reduce inventory levels, reduce procurement costs and time, and improve the efficiency of raw materials inventory management to achieve zero inventory. Suppliers also can help shorten the supply response time, improve working capital efficiency, reduce transaction risks and transaction costs, speed up the industry chain and downstream flow of information, strengthening the overall cooperative partnership, enhance the continuous improvement of supply chain capabilities, calm face on changes in the market. “VMI / JIT” service benefits include: reduced inventory; through collective procurement of lower procurement unit; through the establishment of cooperative relations between the demand to reduce the total purchases; reduce the number of suppliers; through improved supplier, suppliers and users procurement process between saving time; continuous improvement of the supply chain capacity; to strengthen supplier partnerships; reduce the risk of outdated stock; with suppliers to improve product performance, improve product quality; by users authorized suppliers to promote between suppliers and users of the exchange; reduce purchase orders, invoices, payments, transport, receiving and other transaction costs.
VMI mode of operation plan
VMI Implementation Guidelines
In the work surface, the first to formulate a comprehensive checklist, introduced the main contents include the assessment the success rate, develop key performance indicators representative (KPIs) to evaluate the might boost efforts to achieve the objectives of key operations and make realistic goals; second, continuous assessment performance, including ongoing assessment of its progress rating scale used to track performance and provide opportunities to discover areas of improvement; Third, changes in the processes of communication, is intended to respond to market conditions change process should be expected to change frequently, such as promotional schedule changes and changes in goods; to communicate these changes to strengthen the work to implement processes and make appropriate adjustments to the related systems; Fourth, data collection and adjustment, to ensure that “data complete “, that is to collect all necessary data for analysis, the assessment amount criterion before the implementation of a total and consensus, in order to avoid misunderstanding Renhe; 5 is Quebaoliucheng full automation, reducing manual Caozuo right Shuru data and order Queren of interventions and building data input automatically linked; 6 is to ensure the efficiency of the flow of information, can be used to provide timely and accurate data, “electronic data interchange” (EDI), the establishment of the correct data and products to improve the speed of the mechanism of transmission, reducing replenishment lead time; 7 The VMI system is complete, can handle large amounts of data analysis to ensure business can be different factors (such as: Promotional Activities and New Products) automatic purchase orders. 8 is a demand for change management, in response to changes in demand and changes in the external environment, regular inspection data limitations, the analysis used to confirm the latest information.
VMI service flow chart
In the corporate side, the first enterprises to improve their recognition of this, formation of an active working group dedicated to obtain high recognition and support of management, access to adequate resources (rational allocation of work). Second, cross-functional departments of the input and contribution, as VMI process involves different functional departments within the enterprise, so the coordination between departments and input the key for the successful implementation of VMI. Finally, organizational communication and regular review meetings, the project team must meet regularly and report the progress of the implementation of the work to identify the problem and solution.
The key to success
VMI is a new logistics operation, involving multi-stakeholder, process complexity, the implementation cycle is long, involving many factors of success, sum up, there are three critical success factors: continuous performance evaluation, effective communication, business continued commitment.
Performance assessment. The main factors for the operation process requires partners to use the rating scale for periodic monitoring of implementation progress. The assessment scale used different key performance indicators to assess the process of implementation performance in different operating performance, according to the baseline and the target Lejie improve the situation and the gap with the target, aimed at monitoring progress Bing Department identified inadequacies, if any in order to make continuous improvement.
Effective communication. Communication between the corporate sector as well as business and communication between trading partners, is a very important success factor. Close communication to avoid misunderstanding, let work more smoothly. In addition, the two sides should meet regularly to discuss all project team members so that the problems faced, and to jointly seek solutions.
Organizational commitment. This includes two levels of organizational commitment, above all, active management; followed by the three companies involved in personnel actively involved in the project. Management of the implementation of the new process required full support, and project team members can still be completed during the implementation of new processes for daily work, expressed appreciation and recognition. Proposed regular meetings to report project results to members and ask questions, seek solutions.
The improved business model map
Since the implementation of this process must be carried out before all the co-operation, so all project team members input is extremely important. All members must abide by a common philosophy:
VMI processes and the pursuit of success to promote the best performance of the process. The two sides together to resolve implementation issues, it can surely accelerate the pace of improvement. Therefore, a dedicated project team is the key to success of the project.
Case Study
H company is a large supply chain management companies, with operations in East, South and North regions. As a logistics management needs of those strategic partner, H offers a full range of logistics services, including warehousing and distribution of goods, transport operation and management, supply chain management, JIT logistics management services and the domestic market.
H company has extensive project management capability and corporate production experience, helps customers to the new regional business promotion and marketing, based on this, H became the A’s leading logistics service providers.
A wholly-owned company is set up in Shenzhen, Zhuyaocongshi OA equipment to produce a bonded Chang, Yong You more than 7,000 employees, with Gong Chang Liang of increased production and found that identified several challenges: materials Gongying cycle is long; Hong Kong stock and suppliers Factory inventories are too high; to meet international market growth, plant production plans to expand the existing plant can not meet the new production line established.
A company with share issues after the above, H companies to first solve the customs, to clear out of normal materials and finished products, suppliers and factories and then to solve the problem of inventory. H A company’s excess inventory problem factories and suppliers in Hong Kong and the inventory is too high is proposed route of the strategic plan to go VMI. Followed by H company VMI customs policy implementation has been demonstrated and further research A company and supplier relationships, proposes to solve the issue of warehouse stock to improve supplier relations with A Company, indirectly lower the cost of storage and transportation providers. Then the proposed plant will be outsourced to third-party logistics company, warehouse, raw material warehouse and then moved to outside the factory, in Shenzhen to open another place to establish HUB as unpacking, unloading and warehousing space. Then later in production management has improved forward VMI.
Will be advanced warehouse management technology and the company’s ERP A Butt, H’s real-time inventory system to ensure high visibility. Information systems and logistics network with the support of the company Tigong 了 为 A rapid response of the delivery 解决 program in the large number, Gezhonggeyang the Dingdan can in the shortest possible time to be addressed.
Order processing becomes fast and flexible, electronic interface, orders can be completed within 2 hours of loading and shipping, production line in 1-4 hours, you can receive the goods. Emergency order after the city received notification on 15 to-30 minutes to complete delivery.
According to the application of production lines, spare parts in the warehouse have different stacking, arranging and regional. In order to reduce shipping errors made in the implementation of bar code parts management.
The face of changing customer needs, H company flexible JIT (just-in-time) resolution to ensure high standards of customer service levels, while A plant improve production efficiency and cost savings made contributions, including: Suduanyunshu time; reduce customer logistics costs; reduce customer inventory levels to only two hours of production, A company’s factory in Shenzhen for 3 consecutive years of cost control was based awards; customers streamline operations, the domestic business practices more fluid, so A gradual expansion of the company factory in Shenzhen production to become the world’s largest factory of its group companies.
