4.5 Methods and Tools for I-SCM

A supply chain model where the supplier, rather than the buyer, manages and replenishes the customer's inventory

-> Vendor monitors the buyer's stock levels in real-time and proactively ships replacement products to prevent stockouts

Instead of the retailer or manufacturer manually placing purchase orders, the buyer shares data (such as sales data, current stock levels, and forecasts) with the vendor.

-> The vendor uses this information to calculate demand and automatically ship the exact amount of inventory needed.

A supply chain arrangement where a supplier provides goods to a buyer but retains legal ownership of the items

-> The buyer stores the goods and only pays the supplier when an item is used or sold. Unsold items can typically be returned to the supplier.

No. Consignment stock is optional.

With consignment stock, the inventory remains the supplier’s property until the customer consumes it.

1. Reduced Costs: Lower holding costs and minimized excess safety stock.

2. Fewer Stockouts: Ensures continuous availability of high-demand items.

3. Increased Efficiency: Eliminates the administrative burden of purchase order processing and manual stock tracking for the buyer.

1. Inventory may only be shifted from buyer to supplier instead of reduced.

2. Service quality depends strongly on the supplier.

3. Poor data or planning can cause excess stock or shortages.

Best suited for high-volume, but low-value, and standardized items with stable, predictable demand.

-> frequently used standard items

E.g.: In hospital: needles

car manufactures: screws

Fast fashion: cotton -> sock

It should compare the total costs before and after VMI, including:

• Inventory costs.

• Administrative costs.

• Transport costs.

• Stockout risks.

• IT and coordination costs.

• Possible supplier surcharges.

Postponement means delaying the creation or distribution of product variants until actual customer demand is known.

Many variants create forecasting uncertainty and can cause:

• Unsalable or obsolete products.

• Missing requested variants.

• High inventory.

• Additional transport.

• Lost sales.

-> think fast fashion inudstry

The Order Penetration Point is the point where a real customer order begins to control Supply Chain activities.

Before this point, activities are based on forecasts.

After this point, activities are customer-specific.

1. Make-to-stock: the finished product is produced before the order.

2. Assemble-to-order: standard components are stocked, but final assembly starts after the order.

3. Make-to-order: production starts after receiving the customer order.

1. Manufacturing postponement: delaying product customization.

2. Supply Chain postponement: delaying variant-specific transport and distribution.

Manufacturing postponement keeps products generic for as long as possible and delays activities such as colouring, packaging, configuration, or final assembly.

-> Benetton example: produce neutral garments and daye them later accroding to color demand

Risk pooling means using common or generic inventory to cover the demand of several later product variants.

This normally reduces total safety stock -> bcs lesss is needed since you can just adjust the product to the demand

Full speculation: production and distribution happen before customer orders.

Full postponement: production and distribution happen only after receiving customer orders.

1. Lower inventory costs: Storing generic parts instead of many finished variants, reducing storage and insurance costs.

2. Less waste: Generic stock is less likely to become obsolete because it can be customized later.

3. More flexibility: Companies can react to actual demand instead of relying only on forecasts.

4. Better customization: More product variants can be offered without storing every finished version.