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Vendor Managed Inventory
Vendor Managed Inventory
Oracle Applications provides integrated support for VMI beginning from Release
11i Family Pack H. In order to use this business process, you must have Oracle
Inventory, Oracle Purchasing, and Oracle Collaborative Planning up to Patch Set H
(or 11.5.8) as a pre-requisite.
Note: While VMI and Consigned Inventory often exist simultaneously, they are not synonymous terms.
Patch Set H provides support for VMI only.
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1. VMI Process
Overview
Monitor
View On
Hand
Balances
Under Min
Qty?
No
Monitor Status
Updates
Yes
Manual
Replenish
Enter Order
Save
Requisition
Import Req
in PO
Run VMI
netting
engine
Examine
Proposed
Release
Release
Requistion
Import Req
in PO
Automatic
Release?
Yes
Request
Goods
Yes
No
Receive
against new
BPA release
Route &
Receive
No
Store &
Consume
Deliver to
Subinventory
Autocreate
VMI Req to
BPA release
Perform
Misc.
Transactions
End
Receive
against new
BPA release
or
Perform
Planning
Transfer
or
WIP
Transfer, SO
Issue
Monitor: The VMI supplier logs onto Collaborative Planning and monitors the
current level of inventory items. This view of inventory is restricted to those
items for which they have planning responsibility. Suppliers can see the
balance of on hand stock, in-transit quantities entered on ASNs, open
requisitions and purchase orders, and other pertinent information such as
forecasts.
Request Goods: Based on this information, the supplier can either manually or
automatically request goods for shipment to the customer. A request results in
the creation of an approved purchase requisition in the Purchasing application.
The customer can manually assign these requisitions onto a blanket order with
the VMI supplier, or set up the system to have this process completely
automated. The supplier will then be able to make a shipment upon approval of
the blanket release.
Route and Receive: The customer records receipts in the ordinary fashion,
optionally inspecting goods for quality conformity , and delivering the goods
into stock. During the procurement cycle, quantities are collected and made
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visible to the supplier so that they can be tracked during all stages through
delivery into stock.
Store and Consume: Once the customer moves the goods internally, issues them
to WIP or sells them, the quantity of stock visible to the supplier is decremented.
Oracle Purchasing, Inventory and Collaborative Planning are used to provide end-toend coverage of the VMI procurement cycle.
PO: Convert Requisition UOM to Source Document UOM: this profile option
controls the functionality of Autocreate/Create releases. The following options
exist:
1. Null - Autocreate will not convert the requisition unit of measure to the
blanket purchase agreement. Create Releases concurrent program is
unaffected by this setting and will always convert requisition lines in a
different unit of measure to that of the blanket agreement.
2. Yes - any method for release creation would convert the requisition line
unit of measure to blanket agreement line unit of measure.
3. No - None of the methods would convert the unit of measure.
The recommended setting for this profile option is Yes when VMI is used,
since it is possible for the supplier to suggest replenishments in a different unit
of measure than the documents controlling the agreement.
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PO: Release during ReqImport: this profile option controls the creation of
blanket releases. The following options exist:
1. Yes - blanket releases will be generated when ReqImport is run,
depending upon the Release Method setting in the Approved Supplier
List (ASL).
2. No - releases will not be generated despite the ASL settings. You must
run the Create Releases concurrent program separately in order to
generate
releases.
The recommended setting for this profile option is Yes.
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Automatic Release/Review: if you select this setting and you have set the profile
option PO: Release during Reqimport to yes, blanket releases created by
suppliers will require your review and approval
If, for either of the ASL automatic release options, you have set the PO: Release
during Reqimport profile option to no, then you must use the Create Releases
concurrent program in order to generate releases for VMI.
If you have set the Automatic Creation Item attribute to yes in the PO Create
Document workflow, the ASL automatic release settings are disregarded and
releases are always generated automatically.
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User Definition
Form
Note: You cannot select the VMI attribute for Asset Management, OSP, ATO or CTO items. In
addition, Process Manufacturing and Warehouse Management organizations cannot be used in conjunction
with VMI in Patch Set H.
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Approved
Supplier List
Attributes Form
Note: The VMI UOM field contains the unit of measure for the item in the organization that owns the
Approved Supplier List (ASL) entry. If the ASL is local, the unit of measure is the primary unit of measure in
the current inventory organization. If the ASL is global the primary unit of measure is determined by the
organization that owns the global entry. This field cannot be updated.
Once you have enabled the Approved Supplier List for VMI, you can enter details in
the VMI tab of the Approved Supplier List Attributes. These include the minimum
or maximum (threshold) level of desired inventory and the method by which the
supplier will replenish materials.
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Request
Goods
Monitor
Route &
Receive
Store &
Consume
VMI suppliers should monitor the status of on-hand and in-transit goods in order to
trigger replenishment at the appropriate times. For this purpose, Collaborative
Planning presents information from Oracle Purchasing and Inventory Applications
to the supplier. In addition, VMI suppliers will be notified when the available
supply falls below the approved minimum.
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Supply Chain
Exchange VMI
View
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Request
Goods
Monitor
Route &
Receive
Store &
Consume
Request Goods
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Request
Goods
Monitor
Route &
Receive
Store &
Consume
Your Purchasing setup determines how supplier initiated requisitions are handled
once they have been imported from Collaborative Planning . You have the option of
placing these requisitions into the requisition pool so that a purchasing agent can
automatically create the requisitions onto blanket purchase orders. You also have
the option of automating the entire VMI process so that your employees need not
involve themselves in a task that has been charged to the supplier.
VMI Requisitions
When a supplier initiate a request for VMI items in Collaborative Planning,
requisition lines are imported into Oracle Purchasing as approved requisitions using
the Requisition Import concurrent program. A series of validations are performed in
order to ensure that the supplier has been granted permission to raise a requisition
for the specified item and to deliver it to the desired ship-to organization. You
cannot manually create a VMI requisition from the PO Requisition form or generate
one through an internal planning run, as a supplier alone is tasked with this
responsibility. You can query VMI requisition lines in the Requisition Summary
form at any time.
Requisition
Summary Form
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Autocreate Form
You can either create a blanket release or add VMI lines to an existing blanket
release using the Autocreate form. In find requisitions window, you can select VMI
requisitions and build your purchasing documents in the same way you would
perform this task for a non-VMI requisition.
Note: You can only source VMI requisition lines to valid Blanket Releases. The Sourcing information
on the requisition must match the Supplier and Supplier Site information on the Blanket Purchase Agreement
to which the requisition is assigned.
Note: Grouping rules ensure that VMI lines are not summarized into a single release shipment line with
non-VMI lines. While VMI and non-VMI lines can coexist on a blanket release, they cannot be combined at
the shipment level.
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Purchase Order
Summary Form
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Request
Goods
Monitor
Route &
Receive
Store &
Consume
Once you receive and deliver VMI stock into inventory, your supplier can continue
to track the on-hand quantity of these goods until you move them into regular stock
or consume them.
Material
Workbench
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Using the Materials Workbench form, you can query VMI on hand quantities by
indicating the Supplier and Supplier Site for your VMI supplier. If you do not enter
supplier or supplier site in the Find form, you will see on hand quantities for both
internally replenished stock and VMI stock (if they both exist in a given subinventory, lot, locator, or serial number).
Miscellaneous
Transactions Form
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This section describes the relationship between the VMI business process and other
traditional replenishment strategies.
An enterprise may decide to procure an item by both VMI and traditional
replenishment methods. In such a case, stock is replenished by one or more
suppliers under a VMI agreement and another part is replenished by the enterprise
itself, using a conventional procurement process controlled by one of the traditional
replenishment strategies, including min-max planning, reorder point or MRP.
Oracles e-Business Suite fully supports this business practice with a multidimension on hand model that allows you track you stock level by planning
responsibility. For instance, consider a scenario where a supplier S1 manages a
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quantity Q1 of a given item under a VMI agreement; at the same time, another
supplier S2 manages a quantity Q2 of the same item also under a VMI agreement
and the enterprise independently procures quantity Q3 of that same item. The
multi-dimension on hand model allows you to keep track of these three on hand
quantities separately and independently from their physical location. Each quantity
on hand is identified by a planning organization that has the responsibility for
replenish it: in this case, S1 is the planning organization associated with Q1, S2 is
the planning organization associated with Q2 and the enterprise itself is the planning
organization associated with Q3.
For the purpose of reviewing the relationship between VMI and traditional
replenishment methods, including min-max planning, reorder point planning and
MRP planning, VMI stock is where the planning organization is the supplier;
internally replenished stock is where the planning organization is the enterprise.
MIN MAX Planning
In Min-Max Planning, the enterprise aims at maintaining the quantity on hand of a
particular item between a lower (minimum) and a higher (maximum) specification
limit as defined on the item definition for that organization.
Conceptually, this is a process similar to VMI where a supplier maintains the VMI
stock between the specified minimum and maximum quantities defined on the
Approved Supplier List (ASL).
In order for these two replenishment processes to coexist, they need to be completely
independent from each other. Oracles e-Business Suite fully supports this scenario:
Inventory Min-Max Planning only considers the internally replenished stock and
excludes the VMI stock from its calculation
Suppliers only see the VMI stock that they are responsible for replenishing.
In a Min-Max scenario, the following setup is recommended for the items:
Inventory Planning Method: set to Min-Max Planning
Planning Method: set to MRP Planned or MRP/DRP planned in order to enable
Data Collections to publish the item to Collaborative Planning and to allow the
planner to review the long term forecast on the Planner Workbench.
Release Time Fence: set to Do Not Release (Kanban), the item is replenished by
Min-Max Planning and the planner should not create additional releases.
The Min-Max Quantities established for the Organization/Item or
Subinventory/Item should not include quantities supplied under a VMI
agreement. The VMI supplied quantities should be excluded from the
enterprises Min-Max quantities. For example, you want to enforce a total
minimum = 100 and total maximum = 200 for item A., Item A is subject to VMI
minimum and maximum specification limits of 25 and 50, respectively. You
should set the minimum = 75 and maximum = 150 for the enterprise. The
enterprises minimum and maximum have been reduced by the VMI minimum
and maximum specification limits.
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MRP Planning
This section applies to both Oracle Material Requirement Planning (MRP) and
Oracle Advanced Supply Chain Planning (ASCP).
You can use MRP Planning to plan for your internally replenished stock while you
delegate the replenishment responsibility for the VMI stock to your supplier. In this
case, however, MRP needs to balance the total demand against the total supply,
including both the internally replenished stock and the VMI stock.
Consider a scenario in which you experience an unusual increase in customer
product demand. This increase in demand has not been reflected in the minimum
and maximum quantities established for the VMI supplier of an included component.
Assume that the supplier keeps the VMI quantities within the desired range. In this
situation, MRP will suggest a requisition that should be supplied outside of the VMI
arrangement, as the requirement is pulled from the customer, not pushed by the
supplier as part of VMI. A non-VMI order will be placed for the additional
quantities required to meet the increased demand.
Consider the same scenario, but in this case assume that the supplier has allowed
quantities to fall below the desired minimum level. You run MRP, resulting in a
proposed requisition for both non-VMI goods (from MRP) and VMI goods. It is
possible that both a non-VMI and a VMI replenishment transaction could arise for
the same demand. Reviewing can mitigate this risk and manually adjusting MRP
requested quantities to exclude those that the supplier will replenish using VMI.
Additional Information and Resources
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Using Vendor Managed Inventory in Oracle Applications Release 11I June 2002
Author: Greg Comlish
Contributing Authors: Paolo Juvara, Manish Patel, Margaret Guiliani, Paul Correa
This document is provided for informational purposes
only and the information herein is subject to change
without notice. Please report any errors herein to
Oracle Corporation. Oracle Corporation does not
provide any warranties covering and specifically
disclaims any liability in connection with this document.
Oracle is a registered trademark of Oracle Corporation.
Oracle Corporation
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Copyright Oracle Corporation 2002
All Rights Reserved
Printed in the U.S.A.
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