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Inventory management has two very different but effective methods Vendor managed inventory and consignment inventory A company may choose to utilize either of these two methods to manage inventory If a company is able to manage inventory they will be better able to work the companys capital to the fullest extent The following paper will identify the differences between the two as well as identify what type of company is best suited for each method Definition Vendor managed inventory VMI is a means of optimizing supply chain performance in which the manufacturer is responsible for maintaining the distributors inventory levels The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders Under VMI the manufacturer receives electronic data usually EDI or via the internet that tells him the distributors sales and stock levels The manufacturer can view every item that the distributor carriers as well as true point of sale data The manufacturer is responsible for creating and maintaining the inventory plan Under VMI the manufacturer generates the order not the distributor Williams 1996 Consignment inventory CI is when the supplier places inventory at a customers location and retains ownership of the inventory Payment is not made until the item is actually sold In other words the supplier places some of his inventory in his customers possession in their store or warehouse and allows them to sell or consume directly from his stock The customer purchases the inventory only after he has resold or consumed it Williams 1996 Set up of ProgramSoftware VMI software application manages stock levels from various locations With an endless supply of available stock VMI software provides companies with complete list of inventory Comergent is one of many companies which provide VMI software implementation and training Comergentcom On average implementation of software and program setup can take up to 150 days Consignment software will help keep track of inventory on-hand that the DC Distributing Companies companies
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