Ans Inventory management system : Inventory Management system is a business proc

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Ans  Inventory management system :

Inventory Management system is a business process which is responsible for managing, storing, moving, sorting, arranging, counting and maintaining the inventory i.e. goods, components, parts etc. Inventory management ensures that the right inventory is available as per the demand at low costs. Inventory Management makes sure that the core processes of a business keep running efficiently by optimizing the availability of inventory

Inventory Management includes managing and controlling raw materials, stocks, finished goods, warehousing, storage and other aspects which help reach the product from production to distributor or retailer.

Vendor Managed inventory : Vendor-managed inventory (VMI) is an inventory management technique in which a supplier of goods, usually the manufacturer, is responsible for optimizing the inventory held by a distributor.

VMI requires a communication link—typically electronic data interchange (EDI) or the Internet—that provides the supplier with the distributor sales and inventory data it needs to plan inventory and place orders. In contrast, under the traditional arrangement the distributor handles those tasks. The inventory can be owned by the distributor, or by the supplier, often under consignment.

The benefits of a vendor managed inventory system may include better inventory accuracy, forecasting, and service, though it can present challenges in communication, cultural resistance, and setting clear lines of responsibility.

Just in time System : The just in time concept, or JIT, is a system of managing inventory that is designed to improve efficiency and reduce waste in a production process, and minimize inventory carrying costs. The idea is to receive production inputs only as they are needed in the production process. To implement the just-in-time system, a company must establish tight coordination with its suppliers.

Ideally, a company employing the just-in-time system would have no on-hand inventory. It costs money to hold inventory. The just-in-time system aims to eliminate that cost. A production process using the just-in-time system would receive the correct type and quantity of material inputs at the precise time the inputs are needed in the production process. Depending on the process, the just-in-time system may require multiple material deliveries from suppliers per day. This system requires a closeness – in terms of profession relations as well as geographic proximity – with suppliers.

The advantages of use of VMI compared to JIT :

VMI concept aims to reduce inventory in the pipeline, besides achieving the concept of JIT - Just in time wherein the ownership of the inventory lies with the supplier until the time of usage or sale where it gets transferred to the buyer. This model also reduces operational costs of logistics and inventory management for the buyer.

Increased Customer Service Perhaps the most important aspect of VMI is the improved channel communication. Manufacturers, distributors and retailers/wholesalers have to build communication systems utilizing advanced software.This provides both you as the vendor and your customers with information necessary to operate a VMI system. Additional results from increased communication and cooperation are better customer service, improved quality, reduction of costs and increased sales.You improve your customer service by accurately and swiftly responding to your customers’ needs.

JIT Inventory :JIT stands for Just-In-Time. JIT, focuses on only ever having enough inventory on hand to meet current needs. The amount of inventory needed depends on your product type, how fast it will move off the shelves to consumers and how long it will take to produce more. Because of the complicated management systems required, JIT inventory management has only recently become affordable options for businesses because of the advances in the cloud, IT speed and storage and business systems.

Your customers want to utilize JIT inventory to get the most out of their physical space and reduce costs to their business. With VMI, you establish JIT inventory levels for your customers and produce according to that need. You see their sales and inventory levels and now have a better insight into their need. This has tremendous advantages for manufacturers and warehouses as well as for their customers. Leading to much better forecasting for the vendor, inventory levels can be really optimized for both parties.

Reduction of Sales Costs : Storage adds significantly to the costs of your product. You incur costs to store inventory waiting for an order, your customer also incurs costs storing inventory waiting for a sale, you have collectively added significant costs to each item sold. Whether this cost is visible or not, it is there.

VMI benefits business relationships between more than just you and your customers. Distributors often take part in a VMI relationship, increasing the accuracy and efficiency of your inventory management while decreasing the costs. Often a distributor will receive the same sales data the vendor does and then optimize the inventory at the customer site to reduce costs to the vendor and to decrease turn-around time when the customer needs new inventory.

Additionally, the same system of communication built with your customers can be used to build relationships with your suppliers to increase your use of JIT inventory in your manufacturing processes. While any business relationship needs to be entered into with caution, the systems that businesses need for VMI facilitate much stronger business alliances across the entire supply and distribution chain.

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Inventory management system

What are the advantages of use VMI compared to jit?

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