Using Vendor Managed Inventory (VMI) in Oracle Applications

An Oracle White Paper June 2002

VENDOR MANAGED INVENTORY

Vendor Managed Inventory (VMI) is a procurement and planning practice in which a company delegates key inventory management functions to one or more of its suppliers. Under this arrangement the supplier determines the items, quantities, and delivery schedules on behalf of the customer based on information it receives from the customers inventory and procurement systems. Using VMI, manufacturers and distributors can anticipate customer needs and provide inventory more proactively than is possible using traditional procurement methods. Today there is a great deal of interest in VMI owing in part to its implementation by high profile companies spanning industries as unique and varied as retail, automotive, high-tech and health care. These industries cite greater inventory turns, fewer stock-outs and reduced production down times as primary benefits realized from adopting VMI programs. With VMI, companies are realizing increases in available working capital, reduced inventory holding costs, and ultimately increased customer satisfaction and profitability. Successful VMI programs are far more achievable now than they were ten years ago thanks to the availability of technology solutions that meet VMI requirements in an economical way. This can be done through customized solutions tying together various data warehousing, planning applications, procurement systems, and web services. Alternatively, VMI can be accomplished using a single, well-integrated suite of applications. Either way, a complete VMI solution should offer: For the supplier: The ability to access customer on-hand quantity information, minimum and maximum inventory thresholds, in-transit inventory quantities and expected receipt dates in order to determine when to ship goods The ability to manually execute an approved purchase requisition or blanket release on the customer system and to track the status of the order through receipt, storage, and consumption by the customer The ability to automate replenishment proposals

For the customer: The ability to differentiate between goods that must be replenished by a supplier from those which are internally planned and replenished The ability to perform tasks such as receiving, inspection, and put-away without regard to the procurement method (there must be no required change in these practices to support VMI) The ability to consume VMI materials in Work-In-Process or to explicitly take responsibility for planning from the supplier as needed The ability to better estimate suppliers production schedules based on anticipated demand from the customer.

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Oracle Applications Support for VMI

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 Yes

Under Min Qty?

No

Monitor Status

Updates

Manual Replenish Request Goods No Run VMI netting engine

Yes

Enter Order

Save Requisition

Import Req in PO

Examine Proposed Release

Release Requistion

Import Req in PO

Automatic Release? Route & Receive

Yes

Receive against new BPA release

End

No

Autocreate VMI Req to BPA release

Receive against new BPA release

Store & Consume

Deliver to Subinventory

Perform Misc. Transactions

or

Perform Planning Transfer

or

WIP Transfer, SO Issue

Using Oracles VMI solution, the supplier and customer: 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.

PREPARING TO USE VMI

VMI Setup Prerequisites Before using VMI, you should perform the following setup steps in Oracle Inventory, Purchasing, and Collaborative Planning. Profile Options to Set for VMI There are a number of system profile options that have a bearing on Oracles VMI solution:
FND: Debug Log Enabled: should be set to No (or Null). ICX: Session Timeout: should be set to No (or Null). PO: Automatic Document Sourcing: the following options exist: 1. Yes - purchasing will automatically source documents from the most recently created blanket agreement 2. No - the Approved Supplier List (ASL) is used to determine the blanket agreement. You must indicate the source document to use in the Approved Supplier List Attributes form. You may select either setting for this profile option, based on your requirements. See additional setup information below concerning setups related to automatic document sourcing. 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.

Item Attributes for Use with VMI You can use VMI for any item so long as it is purchasable and contains sufficient default information to process the item through requisition import. You need to include a default list price and an MRP planning method in order to begin using the item for VMI.
You must name a Planner on each item for which VMI replenishment applies, generally the employee responsible for managing or overseeing the VMI relationship with the supplier. You can name the Planner in the General Planning tab of the Item form located at Inventory > Items > Organization Items.

Concurrent Program with VMI VMI Replenishment Engine: this concurrent program performs the release calculations and presents the results on Collaborative Planning. The VMI Netting Engine concurrent program is available from the Advanced Planning System (APS) Administrator responsibility. Data Collection Collections: you can run collections in the following modes: Full Targeted Net Change
Running or scheduling data collections is performed using Advanced Planning System (APS) Administrator responsibility: Collections > Oracle Systems > Data Collection. Initial Data Collection: you should run the initial data collection in Full Collection mode, including collection of user-company associations (the setup of users in the User form, including employees, supplier contacts and customer contacts). The user-company association will allow supplier personnel to connect to Collaborative Planning after collection completes. Full collection will also transmit items which have an associated VMI enabled Approved Supplier List (ASL) into Collaborative Planning. Subsequent Data Collection:. After the initial collection of setup data, you can run data collection in either Targeted Refresh or Net Change Refresh Mode by setting the parameter Purge Previously Collected Data to No. These methods refresh a given set of data and can be scheduled to run as often as necessary. It is recommended that Net Change Refresh be run regularly to collect data that changes

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frequently such as on hand quantities, reservations, purchase orders, and purchase requisitions.
Note: targeted data collection allows you to collect a specific entity (e.g. delete all BOMs and re-collect all the BOMs); net refresh will collect only the new data and will not collect any existing data

Collection Performance: you can improve the performance of Targeted or Net Change Collections by selecting the fewest parameters for update. The minimum for collecting changes in transactional data is PO and On Hand Quantities. If you are performing a Full Collection, you should generally include all collection parameters.

Using Automatic Replenishment Automatic replenishment refers to the ability to automatically propose quantities to replenish based on calculations performed by the Collaborative Planning application. If you use automatic replenishment, you can simply choose the items you want to replenish and select the Release button in the Collaborative Planning VMI view. This release triggers the creation and entry of an approved requisition in purchasing.
To use automatic replenishment, you select Allow Automatic on the Approved Supplier List Attributes form located under the VMI tab. In order to release the proposed requisition, you must stipulate which party or parties should have the authority to release requisitions from collaborative planning: Supplier or Buyer: either party can release the proposed requisition by choosing the release button in the Collaborative Planning VMI view Buyer: only the buyer has the authority to release the proposed requisition by choosing the release button None: neither party is required to release the proposed requisition; rather the release is performed automatically after the calculation of required quantities completes

VMI Blanket Release Shipments You must define and approve a blanket purchase agreement with your supplier before VMI requisitions from that supplier / site can be processed. The blanket agreement should include all the items that are subject to VMI procurement process with that supplier. You may establish as many blanket agreements as you wish to support the VMI process. Using Automatic Release Automatic Release refers to an automated process of sourcing requisitions onto a valid purchasing document in the Purchasing application.
You may choose to have VMI requisitions automatically placed onto Blanket Releases. There are two automatic release options on the Approved Supplier List (ASL): Automatic Release: if you select this setting and have set the profile option PO: Release during Reqimport to yes, blanket releases created by suppliers will be approved automatically (without your review)

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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.

Registering Suppliers on Collaborative Planning Oracle Collaborative Planning allows your suppliers to access a secured view of procurement and inventory information. You need to give access to suppliers as users of Collaborative Planning, Establishing Suppliers as Users Suppliers must be granted access to your system. To do this for Collaborative Planning, you must define a user for each supplier who is granted access to the system. You do this using Oracle System Administrator Responsibility: Security > User > Define.
On the Users form, to define a supplier for Collaborative Planning, you should: Assign a supplier contact (the supplier contact must be setup in the supplier site form) Assign e-mail address Assign Collaboration Planning Responsibility You should not, however, define a person or internal company employee. After you have defined the supplier, you must run Data Collection (any collection type) so that Collaborative Planning recognizes the supplier. The data collection parameter Trading Partner Supplier should be set to Yes in order to register the supplier. Once data collection is complete, the supplier will have access to Collaborative Planning via Supply Chain Collaboration Planner responsibility. The supplier can then view on-hand stock, launch purchase requisitions in Oracle Applications when desired, and track the progress of deliveries.

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User Definition Form

Establishing a VMI Relationship with Suppliers The VMI process can be used alongside any existing business practice you use to perform procurement and inventory management and can be initiated at any time. You can also suspend or terminate VMI at any time without time consuming or labor intensive system setup changes.
You enable a supplier-supplier-site-item-organization association for VMI by selecting the VMI enabled check box on the Approved Supplier List Attributes form. This setup validates all supplier-initiated requisitions to ensure that the supplier is allowed to perform tasks for this item in the designated ship-to organization. When the VMI enabled checkbox is not set, the Approved Supplier List (ASL) is disabled, or the ASL status does not allow transactions, the supplier is forbidden from raising purchase documents on your behalf.

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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Monitor

Request Goods

Route & Receive

Store & Consume

Monitoring the Status of VMI Stock

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.

Collecting ERP data for Collaborative Planning In order to begin using Collaborative Planning to present items, on hand quantities, in-transit and forecast information to selected suppliers, you must first collect all pertinent data from Oracles Inventory and Purchasing Applications. Scheduling data collections performs this function.
Data collection should be run when you add or disable VMI Approved Supplier List entries, supplier contact personnel, or make other changes to setup data in order to see the new or updated information in Collaborative Planning . You must stop scheduled Net Change collections if you run a Targeted or Complete Refresh. You cannot run multiple data collections into Collaborative Planning simultaneously.
Note: If you are using Advanced Supply Chain Planning , you are recommended to run full collections in order to capture all changes in Oracle Inventory and Purchasing Applications. This process cannot be run concurrently with Net Change Collections taken for the purposes of refreshing VMI information. The system will process each of these requests in the order submitted.

Viewing On Hand Quantity Data Suppliers can view the balance of on hand quantities, forecasts based on expected usage, in-transit stock transmitted using Advanced Supply Notices (ASNs), minimum and maximum stocking thresholds and the status of releases into Purchasing. The suppliers view is limited to the items for which they have replenishment responsibility and to on-hand and in-transit quantities that they supply. A supplier cannot view regular (internally replenished) stock or quantities of an item supplied by another supplier.
Note: Suppliers may view a forecast of expected usage for an item for a given forecast horizon. For example, the customer provides an order forecast to the supplier today for the next 10 weeks. During this period, item consumption will be 14 units per week. This averages out to 2 units per day of average daily usage. Based on this forecast, if the customer has 6 units on-hand, this translates to 3 days of inventory.

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Supply Chain Exchange VMI View

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Monitor

Request Goods

Route & Receive

Store & Consume

Request Goods

Suppliers may choose to use either Manual Replenishment or Automatic Replenishment .

Using Manual Replenishment The supplier may initiate a requisition via the Collaborative Planning order entry form at any time. Once entered and saved, this requisition will be imported as an approved requisition using the Requisition Import concurrent program.
The manual replenishment method should be used when the supplier can be reasonably expected to make decisions about quantities and timing of deliveries to the customer, or when supplying few items.

Using Automatic Replenishment Allowing automatic replenishment is advisable when you want the system to propose replenishment quantities through automatic calculation. You can use the suggested replenishment quantities to release requisitions and import them into Purchasing without manual monitoring and order creation. This may be appropriate when you have a significant number of items to maintain and you want to minimize the amount of manual work required of the supplier.
You or your supplier can use automatic replenishment.. With automatic replenishment, the system will automatically propose releases in order to reach the VMI maximum quantity, considering the time fence, existing Advances Supply Notices (ASNs), requisitions, blanket release shipments and available stock in order to arrive at the proposed replenishment quantity. If you use automatic replenishment, you must run the VMI Replenishment Engine concurrent program from the Advanced Planning System (APS) Administrator responsibility. This program performs the release calculations and presents results on Collaborative Planning .

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Monitor

Request Goods

Route & Receive

Store & Consume

Routing and Receiving VMI Stock Requisitions

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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VMI Blanket Release Shipments Blanket Purchase Agreements support both VMI and non-VMI release shipments. There is no need to separately define and maintain Blanket Agreements for items procured by different procurement methods. Neither is there is a need to redundantly define items on your Blanket Agreements to segregate purchase order lines according to procurement methodology. In this way, Oracle Purchasing allows you the flexibility of choosing a procurement method for any shipment. Using the Autocreate Form If you do not want to automatically create blanket releases from supplier VMI requisitions or if no valid blanket agreement is available, use the Purchasing Autocreate form. Supplier VMI requisitions are placed into the requisition pool and must be sourced, manually, to a blanket agreement using the Autocreate form. This is appropriate when you want your internal purchasing employee to source the suppliers requisition from a specific blanket agreement.

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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Viewing VMI Purchase Information

Purchase Order Summary Form

Receiving VMI Items Receiving VMI goods is performed in the same manner as internally replenished stock items; there is no need to differentiate any items in receiving based upon the procurement method used. VMI blanket release shipments carry a non-updatable attribute indicating that the release shipment is planned by the supplier and should thus be presented to the supplier using Collaborative Planning .
Whenever you perform a delivery transaction into Inventory for VMI, the Supplier Site is stored as the planning organization. This allows Inventory to quantify on hand and available stock for each supplier and to present this information to Collaborative Planning . When you return VMI goods to the supplier, the original blanket release shipment is re-opened so that the supplier can furnish you with replacements. Procurement is always aware of the method in which these goods were originally procured, since the shipment line contains the VMI attribute. The returned goods will be presented to the user as ordered and on-hand inventory will be reduced (if the source of the return was Inventory). You can correct receiving transactions involving VMI shipments without restriction. The Purchasing application always maintains the VMI attribute for shipments, regardless of the exceptions and corrections that take place during the receiving process.

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Monitor

Request Goods

Route & Receive

Store & Consume

Storing and Consuming VMI Stock

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.

Commingling VMI and Regular Materials Because warehousing personnel are not necessarily interested in the VMI status of materials when unpacking, counting, and moving goods in the warehouse, an essential requirement of VMI is to allow commingling of goods. Personnel must be able to place goods in a chosen locator; sub-inventory or other physical area of a warehouse without the need to separate them based on whether they constitute VMI or internally replenished stock. Oracle supports commingling of materials so that you can transact all goods in the same way. VMI stock can be identified in any inventory location through on-line inquiry or by running the On Hand Quantities by Supplier Report.

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).

Transacting VMI Materials Several new transactions allow you to transact VMI stock in Inventory:
PO Receipts into Stock {for VMI release shipments}: this transaction is automatically created when you deliver goods into stock from receiving. When a blanket release shipment is marked as a VMI shipment, the Supplier Site is named as the planning organization in inventory. Miscellaneous Receipts {naming supplier/supplier site}: this transaction allows you to enter a miscellaneous inventory receipt and name the supplier responsible for planning. When you create a miscellaneous VMI receipt, the suppliers on-hand quantity is increased and the effect of the transaction can be seen in the suppliers VMI view on Collaborative Planning after the next data collections run. Miscellaneous Issues {naming supplier/supplier site}: this transaction allows you to enter a miscellaneous issue of goods from VMI stock, naming the supplier and supplier site whose planned inventory should be reduced. When you create a miscellaneous VMI Issue, the suppliers on-hand quantity is decreased and the effect of the transaction can be seen in the suppliers VMI view on Collaborative Planning after the next data collections run. Planning Transfers: this transaction allows you to explicitly take planning responsibility from the supplier when the supplier should no longer have visibility to the quantity stipulated in the transaction. The transaction does not move goods; it simply changes the planning organization from the supplier site to the internal organization in which the goods are held. Once you perform a planning transfer and run collection, your supplier can no longer see the quantity transferred in the on hand quantity column.

Miscellaneous Transactions Form

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Consuming VMI Materials Consuming VMI materials requires no special actions on the part of the user. All materials in inventory are consumed in the order in which they are received. For example, you use an item in a manufacturing process and the item is supplied both by using VMI and by internally replenished stock transactions. When a back-flush transaction is performed, materials are moved into WIP on a FIFO basis, and the VMI quantities moved are no longer considered on-hand supply replenished by the VMI supplier. Once transferred into WIP, materials are always considered planned by the internal party.
This principle applies to any movement of VMI materials: moved goods are transferred into regular stock and are no longer visible as supplier on hand quantities via Collaborative Planning. Any transfer back to the original location is maintained and does not reinstate the VMI attribution of goods.

VMI and Other Replenishment Strategies

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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Reorder Point Planning Reorder Point Planning is used to decide when to order additional quantity in order to avoid dipping into safety stock. You can use Reorder Point Planning in conjunction with VMI if you maintain your safety stock as internally replenished stock and you routinely consume the VMI stock replenished by one or more suppliers. 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: Reorder Point 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 replenish. In this Reorder Point Planning scenario, the following setup is recommended for the items: Inventory Planning Method: set to reorder point in order to enable Reorder Point 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), since the item is replenished by Reorder Point Planning and the planner should not create additional releases.

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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There are many sources of information pertaining to Oracles VMI solution, including online help, technical documentation, and user guides. These resources may be found in: All Oracle application documentation is available online (HTML or PDF). In www.metalink.oracle.com, and includes technical documentation, user guides, white papers for: 1. Oracle Inventory 2. Oracle Purchasing 3. Oracle Collaborative Planning

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 World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: 650.506.7000 Copyright Oracle Corporation 2002 All Rights Reserved Printed in the U.S.A.

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