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ecasts Warehouse Wholesale/Retail “ Supplypush‖ Logistics Chain Suppliers B2B Exchange Manufacturing Direct Delivery “ Demandpull‖ Logistics Chain Manufacturing driven by actual demand ? The rate of supply was set by the manufacturer in advance, based on expected demand ? It was the role of the logistics providers to ensure a justintime supply of ponents ? The rate of manufacture is determined on a realtime basis by the rate of demand ? While this model is more efficient, it requires perfect integration of all logistics operations within one process Source: Lehman Brothers, . Kearney Analysis 6 Thirdparty logistics providers (3PLs) can directly, or through a partner work, provide a range of services ? Procurement ? Payables management ? Supplier payment and consolidated invoicing ? Vendor performance monitoring and exception reporting ? Joint process improvement with vendors ? Overall freight coordination ? Full load truck carrying ? Lessthanload truck carrying ? Small lot (less than 150 pounds) carrying ? Order consolidation ? Delivery scheduling ? Expediting special / rush orders ? Returning and reprocessing undeliverable orders ? Delivery tracing ? Performance and exception monitoring and reporting ? Overall inventory management ? Optimizing supplier order schedules ? Optimizing dealer order schedules ? Certification of ining shipments ? Bar coding ? Performance and exception monitoring and reporting ? Tracking and Reporting Systems accessible via Inter ? Material Resource Planning ? Order preparation / assembly / consolidation ? Sourcing of packaging materials ? Printing of corrugate and/or linerboard materials ? Labeling ? Shrink wrapping of cases and pallets Freight and Distribution Coordination Warehousing and Inventory Management Minor Assembly and Packaging Procurement 7 Difference between traditional business model and VMI model Traditional VMI Purchase Order Placement When a customer needs product, they place an order against a manufacturer. Under VMI, the vendor generates the order, not the customer. Inventory Transparency Only order is transmitted to supplier when product is needed. The vendor can view the ―realtime‖ stock level of every item that the customer carries as well as true point of consumption data. Inventory Replenishment The customer is in total control of the timing and size of the order being placed. The vendor is in total control of the timing and size of the order being placed. Inventory Plan The customer maintains the inventory plan. The vendor is responsible for creating and maintaining the inventory plan. 8 Simplest VMI workflow Manufacturer Suppliers 2 3 4 1 1. The manufacturer approves the purchasing terms with suppliers, including the monly agreed inventory responsibility and maintenance scheme. 2. The manufacturer