The Research Of VMI-based Inventory Management And The Application In Fuji Electric Corporation

Traditional manufacturing companies have long suffered from the"bullwhip effect". In order to ensure the continuity of product purchase,manufacturing enterprises have been alone to manage the spare partsinventory, solely responsible for the inventory cost. However, due to thefluctuations in demands, inventory costs has been more and more serious,many companies has even thus been bankrupt. In recent years, in order toimprove the integration of supply chain, more and more companies began toreform the management of supply chain.To improve stock rotation rate and capital turnover, Fuji Electric carriedout a series of inventory reduction activities, including ERP implementation,warehouse5S management and production process optimization (Kanban&Process Improvement), and some results were achieved. However, for partswith long lead time, it is difficult to achieve further improvement. We had totry a new management mode.This thesis introduced a new supply chain management mode-VendorManaged Inventory (VMI), elaborated the concept and the implementationsteps, and also highlighted how to use VMI to effectively manage theinventory of long-procure-cycle parts in Fuji Electric. In detail, firstly the ABC analysis method was used to obtain the inventory management priority;then a combination of qualitative and quantitative prediction methods wasused to improve the accuracy of demand forecasting; finally, by theestablishment of the information platform, upstream corporate stocks anddownstream enterprises demand forecast information were shared, and thethird-party-logistics-involved VMI mode was carried out. The mostimportant point is how to formulate the safety stock levels in VMIagreements—both under the balanced demands and under the dramaticallychanged demands.According to my work experience, four directions need to be improved:determining a reasonable price system to leave profit margin to suppliers;streamlining supply chain processes to achieve rapid response; improving theinformation management system to match the flow of information and theflow of logistics; coordinating the exchange of related information betweenthe various departments.