VMI MRO

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VMI / MRO

• VMI (Vendor Management Inventory) and MRO
  (Maintenance, Repair and Operating)

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What is VMI

• Vendor Managed Inventory 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.

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What is VMI

• Vendor Managed Inventory (VMI) is a family of
  business models in which the buyer of a product
  provides certain information to a supplier of
  that product and the supplier takes full
  responsibility for maintaining an agreed
  inventory of the material, usually at the buyer's
  consumption location (usually a store). Logistics
  involve making sure that the buyer has the
  required level of inventory by adjusting the
  demand and supply gaps.

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What is VMI

• Phrase used to describe the process of a supplier
  managing the inventory levels and purchases of
  the materials he supplies. This process can be
  very low tech such as an office supplies supplier
  or maintenance supplies supplier coming into your
  facility once per week to visually check stock
  levels and place a re-supply order or high tech
  such as an electronic component supplier having
  remote access to your inventory management and
  MRP system and producing and automatically
  shipping to meet your production schedule.

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Sophys Definition of VMI

• Symbiotic relationship with either customer /
  vendor where the inventory provider controls
  replenishment

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Why VMI?

• Vendor managed inventory reduces internal costs
  associated with planning and procuring materials
• Enables the vendor to better manage his inventory
  through higher visibility to the supply chain
• VMI makes it less likely that a business will
  unintentionally become out of stock and reduces
  inventory in the supply chain.

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Where is it Applicable?

• Manufacturing / Assembly
• Just in Time Inventory Management
• Service Center (MRO application)
• Retail market
• Vendors benefit - more control of displays and
  more contact to impart knowledge on employees
• Retailers benefit - reduced risk, better store
  staff knowledge and reduced display maintenance
  outlays.
• Consumers benefit more knowledgeable store staff

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Benefits - Reduced Costs

• Reduce inventory value by 20 on a suppliers
  inventory of 1,000,000 200,000
• Add reduced K-cost on this inventory 60,000
• Cost of re-ordering / receiving

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Who is it applicable to?

• Which suppliers make a difference for you?
• Pick suppliers you trust (on-time delivery,
  accurate product / quantity, proper billing)
• Which customers would you make a difference to?
• Value added service but adds to your costs
• Focus on the 20 of suppliers/customer that
  represent 80 of your requirements.

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VMI Benefits

• Its actually a selling point. Both the
  manufacturer and the distributor love the idea of
  "the power of partnership". They work together to
  achieve the same goal - an improved inventory
  plan for the distributor.

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Performance Indicators for VMI

• Inventory Value
• Inventory Turns
• Fill Rate
• Number of Purchase Orders per month
• Total transportation costs
• Number of items returned
• Once a VMI program begins, there should be a
  quarterly review of these KPI's comparing the
  current levels to the pre-VMI levels and to the
  target levels.

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How it Works?

• Typical distribution model
• When the end user needs product, they place an
  order
• The end user maintains the inventory plan
• VMI model
• Provider receives data from end user sales and
  inventory levels
• The provider is responsible for creating
  maintaining the inventory plan
• The provider generates the replenishment order

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Key Elements

• Electronic Transfer of Data
• Inventory Levels
• Sell through data / usage
• EDI
• 846 Inventory levels
• 852 Sell through data
• 855 P/O Acknowledgment
• 857 Advance Ship Notice
• Trax supports Excel Loads
• Customer Consignment
• Mueller Graphics using Excel on PDA

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Consignment Stock???

• VMI model can be
• Consignment inventory
• Your inventory
• Model doesnt have to change ownership of
  inventory
• Current 6.3 supports customer consignment VMI
  model

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Customer Consignment in Trax

• Customer is setup as a consignment location
• Loc-ID specific to this customer setup in
  location
• Product is validated so only consignment product
  is available in the consignment location

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Customer Consignment in Trax

• Product in the consignment location setup to
  replenish on S/O transfer with calculated
  replenishment points

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Consignment Functions in Trax

• Update Consignment Stock
• Updates the starting on-hand quantities for the
  month in the product location usage record

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Consignment Functions in Trax

• Generate Consignment and Billing Records
• Generates consignment replenishment based on
  on-hand replenishment min/max
• Similar to RRA functionality

• Load Ascii file for Consign Count Qty
• Loads count quantities from Excel Format
• List Consignment Replenishment Records
• Report listing
• Export for Excel format

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Update Consignment Stock

• Consign.gen creates consignment replenishment
  records similar to RRA

Start-qty is opening balance for the month
calculated by Trax
Count quantities can be loaded electronically or
updated manually
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Update Consignment Stock

• Function generates replenishment stock transfers
  to customer based on min / max

Trax calculates a replenishment quantity to
transfer product to the consignment location
based on max-qty (start-qty xfer-in
count-qty)
Inventory transferred to the consignment location
during the month
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Update Consignment Stock

• Generates invoice to the customer based on stock
  used

You also generate the invoice to the customer for
stock used at the end of the month Start-on-hand
xfer-in count-qty
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Replenishment Quantities

• Usage is calculated in the consignment location
  through the sale invoice to the customer
• Usage in the parent location is updated by the
  stock transfer to the consignment location
• Lead time should be consistent (regular delivery)
• Can keep a low safety stock
• Calculate min/max in the consignment location
  using dm.monthend

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Steps for Implementing VMI

• Senior Management Sponsorship
• VMI identified as a strategic objective
• Employee Acceptance
• Especially the person currently responsible for
  maintaining the inventory levels
• Process for Synchronized Product Files /
  Inventory levels

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Steps for Implementing VMI

• Electronic Data Testing
• Validate that the data is being properly
  sent/received
• Acceptance Measurements
• Agree on stocking plan both parties
  understanding how much stock, when, targeted fill
  rates, service levels, etc
• End users POS history not re-ordering levels
  from distributor (end users usage)
• Implementation Go-live

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MRO

• Maintenance, Repair and Operations
• Maintenance, Repair and Overhaul
• Fixing any sort of mechanical / electronic device
  should it become out of order (repair) as well
  as performing the routine actions which keep the
  device in working order (maintenance) or prevent
  trouble from arising (preventitive maintenance)

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Service Contracts

• Any activity, such as tests, measurements,
  replacements, adjustments and repairs, intended
  to retain or restore a unit
• All action taken to retain material in a
  serviceable condition
• The routine recurring work required to keep a
  unit in working order

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MRO Trax Users

• MSHS repairs does maintenance work on heavy
  duty marine engines
• Somagen / Sebia service contracts on medical
  research technology (equipment)
• BGE preventative maintenance contracts (Example
  filters for air conditioners)

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Trax Tools for MRO

• BOM Kits
• Pre-define groups of product required for
  repetitive service
• Kits can group preventative maintenance product
  into a single line entry in S/O or S/W
• BOM items can be setup for repair / rebuild
• Brokerhouse reconfigures vending machines through
  BOM

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Trax Tools for MRO

• S/O Recurring Orders
• Setup recurring orders for schedules like
  preventive maintenance contracts
• Somagen / Sebia use recurring orders extensively
  for pre-defined scheduled sales / parts for
  service

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Trax Tools for MRO

• Service Work Order Module
• Allows additional types of transaction lines for
  expenses, travel, parts time
• MSHS users S/W module with multiple picks (manual
  pick option)
• Long term projects can take anywhere from a few
  days to 6 months
• Contract billing on completion
• Contract billing on schedule
• T M progressive billing

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S/W Customer Service Contracts

• Service contracts in Customer Setup
• Setup service locations under customer

Add physical service locations below the customer
Add service units below the location
Pre-defined service contracts default service
schedule and default products
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S/W Customer Service Contracts

• Setup maintenance contracts under customer

Date range defines starting / ending contract
dates
Bill Cycle Table setups up billing types for
Service Contact
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S/W Customer Service Contracts

• Generate S/W orders based on Service contracts
• S/W template defaults S/W fields
• Date
• Service unit information
• Default products

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S/W Customer Service Contracts

• S/W order is work order for technician

Service unit set as header service product
Additional parts, time, travel can be added to
the work order and then shipped invoiced
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Service / VMI Trucks

• Should be setup as a separate parent location
• Individual inventory
• Individual usage replenishment calculations
• Replenishment path of main warehouse
• Product used in service / store replenishment
  sold from the truck location
• Usage recorded at the truck for replenishment
  calculations
• Stock transfer from main warehouse to truck
  records usage for the main location

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Service / VMI Trucks

• LBI uses truck stock to replenish customer retail
  locations based on site visits
• Hand held units scan / store sales quantities
  used to replenish retail sites
• Nightly ASCII upload of truck sales to Trax
• Orders batch shipped / invoiced to customer next
  day

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VMI / MRO Class of 2008!