Concept Note : 1

VMI in Apparel Manufacturing

Vendor-managed inventory (VMI) is sweeping through many areas of retail today as the next step in supply chain management. Retailers, particularly those in commodity markets, see it as essential technique to reduce inventory and apparel retailers are no exception either. In principle VMI increase sales by avoiding out-of-stocks on in-demand products, and reduce losses from overstocks of products that no longer sell.

What is VMI?

Vendor Managed Inventory (VMI) is essentially a distribution channel operating system whereby the inventory at the distributor/retailer (dist/ret) end is monitored and managed by the manufacturer/vendor (mfg/vend). It includes several tactical activities including, determining appropriate order quantities, managing proper product mixes, and configuring appropriate safety stock levels. The rationale is that by pushing the decision-making responsibility further up the supply chain, the manufacturer/vendor will be in a better position to support the objectives of the entire integrated supply chain resulting in a sustainable competitive advantage. Through access to the retailers’ sales data manufacturers can build to market demand, reacting faster to changing needs.

How is VMI different from traditional inventory management?

VMI is typically the opposite of the inventory management approach taken by most organizations today. Currently, orders are pulled through the supply chain by each partner as inventory levels reach "replenishment/re-order" points. VMI, on the other hand, works in the reverse to link partners together and to grant authority to the partner who is in the best position to make inventory replenishment decisions. This entity is usually the mfg/vend partner given its upstream position in the channel. The overall goal must be to support total value chain cost minimization by pushing decision making on replenishment activities furthest up the supply chain.

While the manufacturer require to predict (forecast!) the demand for retailer. While predicting inventory at manufacturing level involves getting both quality and quantity right. The quality and quantity of merchandise in VMI are two very important (often disguised) parameters for VMI application in manufacturing. Benefits of VMI . In practice it is seen that JIT pushes the effects of unpredictability upstream in the supply chain. quality and quantity. this is the key difference. In JIT scenario vendor is supplying inventory to manufacturer Just in Time. the consumable vendor further up in the supply chain can simply calculate the requirement for manufacturer. Unlike retail scenario where inventory has individual identity and is tracked by SKU. whereas in VMI vendor is maintaining (means already supplied before time) inventory at manufacturer’s warehouse. inventory at manufacturing level has two identities.Why VMI? To reduce/share cost of inventory To reduce/share space requirement for inventory To cut down response (procurement) time To reduce/share uncertainty of type of merchandise requirement To reduce/share uncertainty of quantity of merchandise requirement Typical Benefits to manufacturer • Lower inventory investment (raw and finished) • Better scheduling and planning • Better market information • Closer customer ties and preferred status Typical Benefits to distributor/retailer • Fewer stock-outs with higher turnover • Better market information • More optimal product mixes • Less inventory in channel (transfer costs) • Lower administrative replenishment costs VMI Application In Apparel Manufacturing VMI can be looked as a step beyond Just in Time (JIT) in manufacturing scenario.

Reduced inventory requirements. suppliers can better respond to customers’ inventory needs in terms of both quantity and location. 4. the number of large. 3. or disappear altogether. 2.1. Reduced costs. a supplier’s own inventory requirements are reduced since the need for excess stock to buffer against uncertainty is reduced or eliminated. By constantly monitoring customers’ inventory and demand stream. unexpected customer orders will dwindle. By receiving timely information directly from cash registers. Improved customer service. To mitigate the up-front costs that VMI demands. By knowing exactly how much inventory the customer is carrying. . Fox suggests that manufacturers reduce costs by reengineering and merging their order fulfillment and Distribution Center replenishment activities. Reduced demand uncertainty.

processes. suggestion systems. just-in-time delivery. It is continuous Kaizen is based on making little changes on a regular basis: always improving productivity. materials and supervision that is needed for employees to achieve the higher standards and maintain their ability to meet those standards on an on-going basis. Everyone is encouraged to come up with small improvement suggestions on a regular basis. AIM "Create new ideas to achieve continual improvement through small changes" What is Kaizen? Kaizen was created in Japan following World War II. In business Kaizen encompasses many of the components that have been seen as a part of their success. technology. productivity. The word Kaizen means "continuous improvement".Concept Note :2 Kaizen INTRODUCTION Kaizen is system of continuous improvement in quality. safety and leadership. It comes from the Japanese words("kai") which means "change" or "to correct" ("zen") which means "good". To support the higher standards Kaizen also involves providing the training. safety and effectiveness while reducing waste.from upper management to the cleaning crew. Quality circles. company culture. This is not a once a month or once a year activity. Kaizen involves Setting standards and then continually improving those standards. Kanban and 5S are all included within the Kaizen system of running a business. Kaizen is a system that involves every employee . . automation.

Kaizen focuses on creative investments that continually solve large numbers of small problems. implement it on a wider scale and continuously assess the results. transportation. and Kaizen will also improve the capital projects process. . production capacity and employee retention. What Are The Benefits Resulting From Kaizen?  Kaizen Reduces Waste: In areas such as inventory. but also the establishment of a learning environment conducive to future continuous learning. employee skills. product quality. incremental and company-wide change of existing practices aimed at improving company performance Successful CI CI implementation involves not only the training and development of employees in the use of tools and processes. use of capital. capital projects and major changes will still be needed. Check: Use data to analyze the results of the change and determine whether it made a difference. begin the cycle again. Kaizen Provides: Immediate results. over production. capital intensive improvements.   Kaizen Improves: Space utilization. Instead of focusing on large. If the change did not work. but the real power of Kaizen is in the on-going process of continually making small improvements that improve processes and reduce waste. waiting times. Large. The short description of PDCA cycle is given below     Plan: Identify an opportunity and plan for change. worker motion. organized and systematic process of ongoing.Continuous Improvement Continuous improvement (CI) can be defined as the planned. communications. Do: Implement the change on a small scale. Act: If the change was successful. excess quality and in processes.

lower costs. . and greater customer satisfaction.CONCULISON They result in improved productivity. and lower turn-over. faster delivery. improved quality. employees working in Kaizen-based companies generally find work to be easier and more enjoyable—resulting in higher employee morale and job satisfaction. On top of these benefits to the company. better safety.

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