Home Depot Vendor Managed Inventory

Have you ever wondered about how big company’s like Wal-Mart and Sam’s, Home Depot keep enough inventory on hand to supply the customers? It’s not by chance that they know when to replenish inventory so they will not run out, it is by a process called vendor-managed inventory. Under VMI whomever supplies the good they are responsible for supplying inventory to the customer. For this to work though the customer and the supplier have to both agree on it and set rules for when the supplier needs to replenish the inventory. I am interested in this method because when I looked u VMI I saw that Wal-Mart used it and I wanted to know more about how this method was used because, obviously Wal-Mart is one of the biggest companies in the world so this

When the supplier does not come every day to look at the inventory the customer can send the supplier the inventory levels and the supplier will put the order in to replenish the inventory and then the customer will receive the order and stock the shelves themselves (Piasecki). Another main activity of the supplier is that it must handle it’s on products but in some cases the supplier must handle the inventory of the entire product category. It requires managing the competitors inventory levels as well (Cachon & Terwiesch, 2009). In this system a third party logistics like Ups or Fed Ex can join the system and supply the customer with the inventory from the vendor. All of these activities are important because if the supplier does not come replenish the stock then the customer will not will run short of the stock and not be able to sell anything. Also is the customer does not le the supplier know when it needs stock how will the supplier know when to deliver and how much to deliver so it is a two way street between the supplier and the