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 customer’s 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.
 Using Vendor Managed Inventory

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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View On
Under Min
1. VMI Process Monitor Hand No Monitor Status Updates
Qty?
Overview Balances

Yes

Manual Save Import Req

Yes Enter Order
Replenish Requisition in PO
Request
Goods
No

Run VMI Examine

Release Import Req
netting Proposed
Requistion in PO
engine Release

Receive End
Automatic
Yes against new
Release?
Route & BPA release
Receive

Autocreate Receive
No VMI Req to against new
BPA release BPA release

Perform Perform WIP

Store & Deliver to
Misc. or Planning or Transfer, SO
Consume Subinventory
Transactions Transfer Issue

Using Oracle’s 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-to-
end 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 Oracle’s 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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 Using Vendor Managed Inventory

• 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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 Using Vendor Managed Inventory

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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Request Route & Store &

Monitor
Goods Receive 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 Oracle’s 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 supplier’s 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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Request Route & Store &

Monitor
Goods Receive 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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Request Route & Store &

Monitor
Goods Receive 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
supplier’s 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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Request Route & Store &

Monitor
Goods Receive 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 sub-
inventory, 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
supplier’s on-hand quantity is increased and the effect of the transaction can be
seen in the supplier’s 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 supplier’s on-hand quantity is
decreased and the effect of the transaction can be seen in the supplier’s 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.

Oracle’s e-Business Suite fully supports this business practice with a multi-
dimension 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. Oracle’s 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
enterprise’s 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
enterprise’s 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. Oracle’s 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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 Using Vendor Managed Inventory

There are many sources of information pertaining to Oracle’s 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
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Worldwide Inquiries:
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Copyright © Oracle Corporation 2002

All Rights Reserved
Printed in the U.S.A.

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