Marketing Ppt

PROJECT REPORT OPERATIONS MANAGEMENT GUIDED BYPRESENTED BY Prof. T. T. NIRANJANNITIN BANSAL 129278039 RANJAN SAHU 129278041 ROHIT MANGAL 129278053 SAURABH SINHA 129278057 Project Report On Taxonomy of Implementation Problems in VMI Contents executive director summary3 Introduction4 Under the normal clientele model4 vendor Managed Inventory model4 Consignment Inventory4 seller Managed Inventory and Stakeholders Ch ttaboo ensembleenges5 Challenges faced in capital punishment of vender Managed Inventory7 Analysis of Cases of implementing seller Managed Inventory9 Conclusion11 References12 Executive summaryThe goal of Vendor Managed Inventory is to provide a mutually h wizst family where some(prenominal) sides client and Vendor will be able to control the availability and flow of goods more smoothly and accurately. InVMIa manufacturer or distributor assumes the role of roll planning for the customer. Extensive information manduction is required so that the manufacturer/d istributor stooge maintain a high degree of visibility of its goods at the customers location. Instead of the customer re club when its supply has been exhausted, the supplier is responsible for replenishing and creaseing the customer at appropriate levels.Wal-Mart has masteredVMIand is the company against which many early(a) organizations benchmark themselves. This report covers various issues that be to be considered to implement the Vendor Managed Inventory. It is realized in the report that several risks are to be considered speckle executing VMI. The proper analysis is done in seeking the scenarios where one issue becomes a cay factor in deciding to implement VMI or not. Both Marketers and Distributors go through their own issues to challenge the writ of execution of VMI. Focus of the report is to determine taxonomy of slaying problems in VMI.Introduction A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distribu tors account levels. The manufacturer has access to the distributors list data and is responsible for generating purchase arranges. We can see the differences in maintain instrument as Under the typical business model When a distributor needs point of intersection, they place an order against a manufacturer. The distributor is in full(a) control of the timing and size of the order being placed. The distributor maintains the blood line plan.Vendor Managed Inventory model The manufacturer receives electronic data (usually via EDI or the internet) that tells him the distributors sales and stockpile levels. The manufacturer can view every particular proposition that the distributor carriers as well as veritable point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order*, not the distributor. * acknowledge VMI does not change the ownership of inventory. It remains as it did prior to VMI . Consignment InventoryWhen the supplier places inventory at a customers location and retains ownership of the inventory. Payment is not made until the item is actually sold. A VMI relationship may or may not involve consignment inventory. Vendor Managed Inventory and Stakeholders Challenges Vendor Managed Inventory primarily have various stakeholders involved which includes Vendor/Manufacturer or distributor and retail merchant. Let us examine challenges faced by each Challenges in VMI Implementation from vendors side High administrative costs Suppliers would have to face high administrative costs.They will have to allocate additional staff resources to properly recognize the replenishment activities that were antecedently managed by the retailer. So to overcome these additional costs, vendors must have to save enough money from the inventory costs and sufficient sales volumes and gross margins tone ending of market grant due to less(prenominal) ledge coverage VMI would help in reducing the inventory which could lead to the less coverage of the shelf position on the retailers shop which might lead to the reduction in the market share for that product.To resolve this issue, vendor can provide more stock keeping units of the same product to aim the shelf space and to maintain the market share. Challenges in VMI Implementation from retailers side Loss of Control If VMI is implemented, then in that location is always a fear in the mind of the retailer that he would loose his control over the operations charge. All the decisions like when to order, how much to keep as inventory and when to sell the product would be managed by the vendor now which can alike have somewhat impact on the profit margin of the retailer.Eg. In many causes, Vendor gives discounts to the retailer if they buy in bulk and hence above mentioned questions become crucial for the retailer from pecuniary point of view. In case of products with high shelf life, he might want to ord er in bulk once, instead of ordering in small lots. Danger of being replaced Retailer would be afraid that after implementing of VMI, when al close to all the operations attention related decisions are taken by the vendor, then the vendor might also think of forward integrating.Hence he would not be fully cooperative in sharing of the data and he would always try to make his presence felt in decision making to army the importance of his role. Fear of losing other vendors The retailer would be afraid of losing other vendors, since in the FMCG business retailers imbibe products from a lot of vendors to maintain variety for the customers. It would be difficult to choose the vendor who will manage the inventory, because the same vendor would be biased towards his products.This would lead to the development of bad relationship between the retailer and the other vendors. After implementation of VMI, forecasting of demand is done by the manufacturer, not by the retailers or distributo rs and it might hit back, if manufacturer is not competent in judging the patterns of the consumer demand. Challenges faced in implementation of Vendor Managed Inventory Personal Factors Trust One of the most important factors which can contribute to the achievement of the VMI is trust and good relationship between the vendor and the downstream retailer.But in the FMCG sector, where at that place are a lot of products in the same segment, most of the retailers are unwilling to share their data related to their sales with anyone, even with their supplier. This leads to the ineffective communication between them and both have to incur huge inventory and management costs. Work ethics and cultural differences Each company has its set of work ethics and work farming and if the difference is huge for a vendor and the retailer, then their decisions would not be reorient. Technical IssuesTechnology is one of the most critical factors in facilitating the implementation of VMI which can also stand as a challenge in the implementation of VMI. A lot of skillful systems would have to be installed for the effective working of the VMI. Some of the technical solutions that can facilitate an effective VMI arrangement include Electronic data trade (EDI). EDI transactions can enable suppliers to efficiently manage customer inventory levels remotely. Replenishment software. These applications allow customers to accurately assess project assist levels (i. . the percentage of requests that can be filled from stock) based on various inventory investments. classify coding or radio frequency identification (RFID). These technologies tag products for tracking purposes and can dramatically alter the speed and integrity of the collection and reporting of consumption data. Forecasting software. These applications gather and analyze information from sales, accounting, order entry, and other business systems, using sophisticated algorithms and predictive modeling techniques t o generate fast, accurate demand forecasts.Investment- A lot of investment would be required to install and maintain any of these systems. Properly equipped work force would be required to operate these tools. Investment would also be required to integrate these tools with each other for efficient functioning of the VMI operations. All this cost would have to be incurred by the vendor and to compensate this cost, he must get returns from the efficient inventory management and higher sales volume due to less stock-outs. Testing- It requires a lot of conviction and money in testing the various VMI systems after installing them.An all-inclusive testing has to be done for the EDI system before giving it a final green flag for the VMI system. Analysis of Cases of implementing Vendor Managed Inventory Lets discuss some cases where VMI is implemented Barilla spa Case Barilla is largest manufacturer of fresh and dry pasta products with more than 1000 SKUs. It has sales of virtually $2B and very stable demand at retail level. Challenges it was facing are as under Retailers didnt have large inventories to accommodate new products introduced from time to time.Stock outs are quiet frequent at DOs. Thin margins for both manufacturers and retailers are adding to the problem. Solution offered through VMI Downstream distribution Center (DC) reports inventory and sales data electronically to Barilla on a daily basis. Barilla is managing the inventory of DC and decides how much to ship to them. According to industry Weeks Best Plants 2006 Statistical Profile, 56% of the top 25 plants between 2002 and 2006 have used resident suppliers to manage or replenish inventory.However, the average percentage of purchased materials and components (dollar volume) managed by on-site suppliers is single 13. 7%. So, it seems, there is a time and place for vendor-managed inventory. For example, if youve got an expensive manufacturing line and you ask one of your fall upon suppliers to pu t in the systems and develop the expertise to supply the goods you need on a provided-in-time basis, they will do that if they receive a significant portion of their revenues from you, says Steve Banker, service director of supply chain management at ARC Advisory Group, Dedham, Mass. However, you may have a lot of suppliers where you are only 1% of their total revenue you are not their biggest priority, Banker says. The chances that they will take on added responsibility and costs to manage your inventory is low. So we can see that size of the business does matter in determining the feasibility of implementing VMI.In addition, there is a certain amount of IT integration that has to go on in order to make the VMI relationship work. For suppliers, they need to be able to get your forecasts on a regular basis, make intelligence out of them and have visibility into your inventory levels on an on tone ending basis, says Banker. Turning that into useable intelligence is kind of difficu lt. dispirited and midsized companies often dont have the dedicated IT resources to make that happen, so they struggle. Resident Suppliers Manage/Replenish Inventory (% Of Plants) stratum No Yes 2002 44 56 2003 52 48 2004 48 52 2005 32 68 2006 44 56 2002-2006 44 56 Source Industry Weeks Best Plants 2006 Statistical ProfilePercentage Of Purchased Materials And Components (Dollar Volume) Managed By On-Site Suppliers yr Median Mean Minimum Maximum 2002 5. 0 24. 4 0. 0 100. 0 2003 0. 0 12. 2 0. 0 100. 0 2004 4. 0 15. 2 0. 0 70. 0 2005 6. 0 13. 8 0. 0 67. 0 2006 4. 2 15. 1 0. 0 95. 0 2002-2006 3. 0 13. 7 0. 0 100. 0 Source Industry Weeks Best Plants 2006 Statistical Profile Similarly, we have case of P&G which successfully employed Vendor managed Inventory while ODLO isnt so successful in implementing the same.Also companies like RUAG arent having any financial or strategic benefit out of implementing VMI and hence didnt go for it. If we analyze the sector in which they operates we c ome to know, RUAG which is in Airlines sector involves comparatively simpler inventory to maintain while the risk involved in giving away the details was higher. On the other hand, with the scale of business P&G is in, it is beneficial for both manufacturer (vendor) as well as distributor (or Retailer) to implement VMI. It can be seen both scale and sector favors P&G.GRENDENE, one of the worlds largest footwear manufacturers, implemented Agentrics Vendor Managed Inventory (VMI) solution and aligned its product replenishment process with the real demand of regional distributors/customers, thus increasing service level, optimizing stocks and boosting sales. ACHIEVED RESULTS step-up of accuracy in sales forecasts Increase of sales by 47% for participating retailers Improved management of a product mix, by reducing or discontinuing low-performance and low-turnover products Streamlined replenishment of high-performance productsExcellent boilersuit result with customers using the solutio n. VONPAR With Agentrics VMI solution, acquired a full, web-based supply chain KPI tool. Vonpar Refrescos, Brazils fourth largest Coca-Cola bottling company with products reaching 14 one thousand thousand consumers, implemented Agentrics Vendor Managed Inventory (VMI) solution and with it acquired a complete web-based KPI tool. KPIs track internal and client stock levels, demand planning, order administration, as well as automation of Vonpars product replenishment process, improving service and optimizing stock levels, while improving customer relationships.ACHIEVED RESULTS Average sales increase of 26 percent in the first 12 months after the solutions implementation Significant increase in sales of juices, tea and beer, which reflects amend stock planning for greater availability of products at store level Maximized speed in the exchange of sales information at store level Stock optimization allowing Vonpar to have the right product at the right time in the right place Commercial team freed up to concentre on avoiding out-of-stocks. SYNGENTA Implemented Agentrics VMI solution to manage stock jointly with its suppliers.Syngenta, a world-leading agri-business committed to sustainable culture through innovative research and technology, implemented Agentrics Vendor Managed Inventory (VMI) solution to manage stock in conjunction with its suppliers ACHIEVED RESULTS Reduction of communication errors through process automation and visibility to inventories. Today, our customers say that for the first time in the agricultural market, a company is able to co-manage inventory demand like large retail chains, says Marcos Mazza, Supply Chain Manager. NeoGrid has a solution that perfectly suits our business model Syngenta did not have to adapt to the tool, as the solution metall our needs. Marcos Mazza, Supply Chain Manager. Conclusion The main purpose of this report is to highlight the taxonomy of implementation problems in VMI. From the cases visited, we can deduce that various factors play key roles in determining whether to go for Vendor Managed Inventory as there are lot of issues and cost involved in implementing the same.Size of the business, Sector of the business in operation, inter-relationship among stakeholders all plays equally important role in the actual decision making. Though there is no clear cut understanding on whether to implement VMI or not but one can easily concur with increasing role of technology and with dynamic demand it is only going to rise.References Williams, M. (1998). Making Consignment and Vendor-Managed Inventory Work For You. APICSInternational Conference. Schreibfeder, J. (1997). Vendor Managed Inventory theres more to it than just sell products. Effective Inventory. com Collaborative Planning, Forecasting, and Replenishment Committee. (1998)Jointly Managed Inventory Approach Provides a Lower direct of Detail. CPFR. Org http//www. scm. ethz. ch/publications/Practitioner_publications/Niranjan_etal_2011_Are_ you_ready_for_VMI. pdf http//www. emeraldinsight. com/journals. htm? articleid=1620974show=abstract http//openarchive. cbs. dk/handle/10398/8229 http//www. supplyon. com/vendor-managed-inventory_at_zf. html http//www. industryweek. com/procurement/vendor-managed-inventory-size-matters