Vendor Managed Inventory Process Implementation

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What are the key success factors and failure reasons of VMI process implementation?
Till this point, we saw many benefits of Vendor managed inventory like improved customer service level, better inventory planning and to some extent cost reduction. But in this section of the study we will focus on factors drive VMI to achieve this success.
Conventional thinking about VMI states that it can be achieved by the quality of the information shared. The study by Marloes J.T. Claassen, Arjan J. van Weele, Erik M. van Raaij in the paper “Performance Outcomes and Success Factors of Vendor Managed Inventory (VMI)” reveals that VMI success is impacted by the quality of the buyer-supplier relationship, the quality of the IT-system and the intensity of information sharing. Vendor managed inventory concept comes with the various benefits to supplier as well customer. The information about actual demand and forecasted demand is available in an early stage of supply chain, hence suppliers are better able to align their production processes to customer demand. This way, fluctuations in the process can be easily smoothened over time and supplier can respond proactively instead of proactively. The VMI, supplier becomes responsible for determining replenishment schedule for customer, hence supplier becomes more flexible in managing their production. When supplier is responsible for transportation, they can potentially utilize this opportunity for significant transportation cost reduction.
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