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Vendor Managed Inventory Agreement

It appeared that a BMI agreement should be organized in part on the general and legal aspects of the agreement, while technical and relationship issues should be addressed in the annexes. This increases the flexibility of the agreement to the extent that, over time, the amendments only concern the annexes, which leave the main part of the agreement unchanged. The VMI model with CS agreement for a two-tier supply chain is under development. Vendor-Managed Inventory (VMI) is an inventory management practice in which a supplier of goods, usually the manufacturer, is responsible for optimizing a distributor`s inventory. Some contracts are not coordinated in warehouses managed by the creditor. One of the keys to VMI`s work is a common risk. In some cases, if the stock is not sold, the seller (supplier) will buy the product back from the buyer (distributor). In other cases, the product may be owned by the retailer, but is not owned by the retailer until the sale takes place, which means that the retailer hosts the product (and sales assistance) in exchange for a predetermined commission or profit (sometimes called “consignment stock”). A particular form of this commission operation is scan-based trading, in which the VMI is normally used, but its use is not mandatory. [4] A foreign logistician may also be included to ensure that the buyer has the required level of stock by adjusting the demand and supply gaps.

[3] Another option may be that the seller delivers to the customer`s central warehouse or to a third party`s warehouse. The latter can be a solution for buyers who have outsourced some or all of their logistics operations. Inventory management in the central warehouse allows for better optimization of deliveries, reduced costs and ultimately allows the buyer to maximize economies of scale. [16] However, this is not always an option, so third-party warehouses are often the solution to many different problems, such as the supplier`s warehouse. B, which is too far removed from the buyer`s inexperience, or the buyer`s inexperience in storing certain types of products more difficult to store. [17] These items relate to the type of request information provided by customers to help suppliers control their inventory. Many types of needs information are shared under the VMI program. Information on the needs that are visible to the supplier are sales data, inventory collection, production plan, stock, goods in transit, order delivery, orders and return. The argument is that data and inventory exchange can improve the supplier`s production planning, make it more stable and visibility. It also provides a better understanding of seasonal changes and helps identify critical periods. The supplier can therefore use this information, adapt its production to customer demands and react more quickly.

With the increasing visibility of the information, the supplier has a longer time frame for replenishment [20] The supplier also has real-time visibility that allows it to have a hand in stock for the planning of buyer demand, allowing the stock to be projected according to future demand in order to target (minimize or maximize) its inventory. [21] This stability and coordination reduces the Bullwhip effect[22] because the manufacturer has clearer supply chain visibility and an overview of incoming demand [23]. Review contracts with only one distributor and one supplier in the Newsvendor option. The paper examines the coordination of a supply chain when the inventory is managed by the supplier (VMI). We also offer a general mathematical framework that can be used to analyze contracts for both the inventory managed by Demorsor (RMI) and vmI.

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