enrich IT

Experts in extending Oracle e-Business Suite

Vendor Managed Inventory (VMI)

Presenter: Arul Murugan, CPIM

1/16/2004

VMI

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Agenda

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Overview about VMI

Pre-requisites for Oracle VMI
Oracle Architecture for VMI
Collaborative Planning
Configurations for VMI
VMI Benefits
Option 1: Standard VMI
Option 2: VMI with consignment model
Option 3: Track Vendor Inventory without Oracle VMI
Q&A

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Overview on VMI
Vendor Managed Inventory (VMI) is a procurement and planning
practice in which a company delegates key inventory management
functions to one or more of its suppliers. Under this arrangement the
supplier determines the items, quantities, and delivery schedules on
behalf of the customer based on information it receives from the
customers inventory and procurement systems.
Using VMI, manufacturers and distributors can anticipate customer
needs and provide inventory more proactively than is possible using
traditional procurement methods
This Presentation will address how VMI can be accomplished by using
a single, well-integrated suite of applications ( Oracle )

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Pre-Requisites for VMI

Oracle Applications 11.5.8 or

Oracle Applications 11i prior to 11.5.8 with Family pack H for the following modules
Oracle Inventory
Oracle Purchasing
Oracle Planning (APS)
Collaborative planning is installed and Configured
iSupplier Portal integrated with Collaborative planning for Supplier Collaboration
(Optional)
For VMI with Consignment model following modules need to be at 11.5.9

Oracle Inventory
Oracle Purchasing
Oracle Payables
Cost Management
Warehouse Management

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Oracle Architecture for VMI
Oracle OLTP Instance
Existing modules need to be upgraded
by applying the lattest 11.5.8 rollup
patch

Oracle
Purchasing

Oracle
Inventory

Oracle Order
Management

Need to make configuration changes to

enable VMI for selective items
Collection parameters need to be
changed to include user / Company
association

Data Collection
Oracle APS Instance

ASCP
Collectes data and Plans for all the items
Publish On-hand, Forecast, PO and other data for VMI

Collaborative planning is a new

module within APS Suite that need to
be configured for VMI

Collaborative Planning / Supplier Collaboration

Run VMI Replenishment engine

Publish On-hand,
Forecast, PO

Load Vendor On-hand

as ASN

iSupplier portal need to be installed and

configured. It is integrated with
Collaborative planning and purchasing
module

Supplier Integration

iSupplier Portal
Vendor uses portal
to Acknowledge PO, Update Promise
date, View On-hand, Forecast,
Replenish Inventory, View receipts ,
invoices, payments and other
information on-line

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e-Commerce Gateway
Send On-hand / Forecast
/ PO to Vendor
Receive ASN, PO
acknowledgement and
changes from Vendor

VMI

Large suppliers can integrate to your

Oracle system by sending EDI / XML
file for both inbound and outbound
transactions

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Collaborative Planning
Manufacturer / Distributor

Customers

Customer
Portal

Supplier
Portal

Customer Forecat,
Purchase Orders
Revised Forecast,
Change Orders
Customer's ERP /
Legacy System

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Exceptions

Suppliers

Customer Forecat,
Purchase Orders

Oracle
Advanced
Planning
Engine

Revised Forecast,
Change Orders
Exceptions

Advanced
Shipment notice

Advanced
Shipment notice

Supply Commits

Supply Commits

VMI

Supplier's ERP /
Legacy System

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VMI Configuration Steps

Enable VMI at the ASL level (Item Vendor Combination)

Enter threshold values and other VMI related parameters at ASL level
Setup VMI related profile options
Run initial Data collection with complete refresh including usercompany association
Run VMI Replenishment Engine in Collaborative planning after data
collection
Configure Planner Workbench to handle VMI exceptions by Planners
Optionally Configure to do Auto Replenishment by checking Allow
Automatic checkbox at ASL
Configure isupplier portal to be linked to Collaborative planning to
effectively use Supplier Collaboration

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VMI Benefits
Benefit for the supplier:
The ability to access customer on-hand quantity information, forecast
information, minimum and maximum inventory thresholds, in-transit
inventory quantities and expected receipt dates in order to determine when to
ship goods
The ability to manually execute an approved purchase requisition or blanket
release on the customer system and to track the status of the order through
receipt, storage, and consumption by the customer
The ability to automate replenishment proposals
Benefit for the customer:
The ability to differentiate between goods that must be replenished by a
supplier from those which are internally planned and replenished
The ability to consume VMI materials in Work-In-Process or to explicitly take
responsibility for planning from the supplier as needed
The ability to better estimate suppliers production schedules based on
anticipated demand from the customer.
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Option 1: Oracle VMI
VMI Process Flow

Monitor

Is Available
Qty < Min
Threshold

View On-hand
Balances

No

Monitor Onhand Status

Yes

Replenish

Run VMI
Replenishment
Engine

Vendor
Authorised to
release ?

Yes

Only Buyer can

release planned
orders into
Requistion

No

Receive
Goods

Fullfill
Customer
Demand

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Vendor Ships
the inventory

Pick the material

for a Sales Order

Vendor / Buyer
can release
planned order
into Requistion

Interface Vendor
ASN into Oracle
( In-Transit )

Vendors sends
ASN throguh EDI

OwnerShip
transfers from
Vendor to your
Organization

VMI

Create PO
from the
requistion
Oracle tracks
Vendor
Inventory
seperately from
your invetory by
planning
Organizations
Receive Ithe
goods in your
inventory

Fullfill the
Sales order

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Option2: Oracle VMI with Consignment
VMI Process Flow

Monitor

View On-hand
Balances

Is Available
Qty < Min
Threshold

No

Monitor Onhand Status

Vendor
Authorised to
release ?

Yes

Vendor / Buyer
can release
planned order
into Requistion

Yes

Vendor
Replenishment

Run VMI
Replenishment
Engine

Only Buyer can

release planned
orders into
Requistion

No

Receive
Goods

Fullfill
Customer
Demand

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Vendor Ships
the inventory

Pick the
material for a
Sales Order

Interface Vendor
ASN into Oracle
( In-Transit )

Vendors sends
ASN throguh EDI

System relives the invenotory from

Vendor and book into your books
(All accounting transactions take
place at this point of time
Only now accrual takes place and
you are liable to pay vendor)

VMI

Create PO
from the
requistion

Receive Ithe
goods in your
inventory

System will not generate any

accounting transactions.
On-hand inventory will not be
in our books. On-hand
inventory will be tracked by
Vendor
No accrual takes place
** Requires 11.5.9 Upgrade

Fullfill the Sales

order
(Can configure to
take ownership at
point of sale)

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Option 3: VMI for version prior to 11.5.8
For Clients using Oracle applications version prior to 11.5.8 can
implement VMI in one of the following ways by extending your
Oracle e-business suite to support VMI
1. Create a Separate inventory Organization to stock and
track Vendor inventory
2. Use ASN to track Vendor Inventory. As long as the
inventory is managed by Vendor it will be considered
as ASN In-Transit and when you want to consume the
material receive the inventory against ASN into your inventory
3. Load vendor on-hand as vendor Capacity for each item vendor
combination in ASL. Optionally load on-hand as MPS entries as
well with ATP option checked and production option unchecked.
This will enable to promise customer orders against vendor
inventory when ATP is performed in OM
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Profile

enrich IT:
enrich IT specializes in extending your Oracle E-Business suite with strong
expertise in base application. Our unique model allows low cost implementation
of quick hit projects for a fixed fee. Our normal implementation time frame is 3
to 8 Weeks and we promise on-time delivery. We partner with you in developing
Multi Generation Plan and executing in Quarterly / Monthly Releases

Arul Murugan:
Arul Murugan, CPIM is a Managing Principal Consultant with enrich IT and is
specializing in the implementation and upgrade of Oracle e-business suite. He
has been a functional lead consultant / architect for about 8 years in
implementing Oracle for manufacturing and service industry in the areas of
Supply chain planning, Manufacturing, Distribution and CRM. Arul has done
several successful full life cycle Oracle implementations and also extended the
Oracle e-business suite for lot of clients after Go-Live.

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Contact Us

Arul Murugan, CPIM

enrich IT
Managing Principal Consultant
404-723-1405
Arul@enrichIT.com

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