Inventory management Essay Example | Topics and Well Written Essays - 750 words

Inventory management - Essay Example While VMI does require a strong partnership and trust relationship, given the fact that it decreases expenses, enhances strategic product development, and leverages available technology, there is no reason to think that an upsurge in demand will change the fundamental principles that make VMI work. Although Scouras takes a generally negative position on VMI and feels that suppliers should not make inventory management a core competency, there is much to be said for the system itself. His assertion that the success of the methodology depends upon the economic climate is not supportable in light of the fundamental benefits provided to both suppliers and retailers regardless of the status of demand. The first notable advantage is that VMI decreases expenses on both ends of the supply chain. For the supplier, efficiencies in purchasing, ordering, shipping, and warehousing are increased while customers receive the cost benefits associated with carrying less inventory (Coleman and Poulan, 53). Supply chain efficiency is always a good thing and changes in the rate of demand for any particular product do not alter that fact. The argument that suppliers incur a higher risk due to their management of inventory is unavailing; suppliers are able to directly control the amount of productio n, and would be able to adjust their production processes to meet the level of demand present in the market at any particular point in time. In fact, the use of VMI allows suppliers to more accurately gauge which products are experiencing higher demand. A second significant advantage provided by VMI is the fact that it allows suppliers to engage in strategic product development. Users of the system have found that it brings them closer to their customers, provides more information on consumer preferences, and allows them to adjust and manage retail stocks (Lowson 76). The benefit of this proximity is that suppliers are able to develop new or improved