Vendor-managed inventory for warehousing and logistics management
Question 1 – 3 Marks
Walmart designs its networks so a distribution centre supports several large retail stores. Explain how the company can use such a network to reduce transportation costs while replenishing inventories frequently.
Question 2 – 2 Marks
An auto manufacturer sources both office supplies and subsystems such as seats. What, if any, difference in sourcing strategy would you recommend for the two types of products?
Question 3 – 5 Marks
Dell Inc., the world’s largest computer systems company, bypasses retailers and sells directly to customers via phone or the Internet. Once an order is processed, it is sent to one of its assembly plants in Austin, Texas, where the product is built tested, and packaged within eight hours. Many of Dell’s suppliers are located in Southeast Asia, and their shipping times to Austin range from 7 days for air transport to 30 days for water and ground transport. To compensate for these long lead times, Dell’s suppliers keep inventory in small warehouses called “revolvers” (for revolving inventory), which are a few miles from Dell’s assembly plants. Dell keeps very little inventory at its plants, so it withdraws inventory from the revolvers every few hours while most suppliers deliver to their revolvers three times a week. Dell has a vendor-managed inventory (VMI) arrangement with its suppliers who decide how much to order and when to send their orders to the revolvers. Dell sets target inventory levels for its suppliers—typically 10 days of inventory—and keeps track of how much suppliers deviate from these targets and reports this information back to suppliers .
How might other companies (including services) use vendor managed inventory in its supply chain design? Discuss the advantages and disadvantages of VMI.
