The Truth About VMI

Revelations and Recommendations from the 2003 ESCA-ChainLink Research Study on VMI in the High Tech Supply Chain

Abstract

The high tech industry has experienced a striking shift from traditional replenishment processes to Vendor Managed Inventory (VMI) replenishment for various products during the last decade. This has been a wrenching transition for many suppliers. VMI was the top issue brought up by Electronics Supply Chain Association (ESCA) members in 2002. In October 2002, ESCA, in association with ChainLink Research and several other partners, launched an ambitious research project – a survey of supply chain practitioners at 60 firms, interviews of 14 firms, and the formation of the VMI working group (see sidebar list of working group members), which met in a series of intensive interactive sessions.

Report

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There was a passionate level of commitment and participation in the VMI working group by senior supply chain managers from the top companies in the industry as well as a number of small to mid-sized firms. This group of seasoned supply chain veterans provided an invaluable, industry-wide perspective and set of insights to guide the project and validate the findings and recommendations.

This report provides critical insights into the inner workings of VMI: the impact it is having, major areas of contention, how contracts are being structured, the obstacles faced, critical success factors, and recommendations for improvements across the industry.


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