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<ManualTopic ID="/baanerp/wh/onlinemanual/000458" xml:lang="en">
   <Header>
      <Title>Vendor managed inventory</Title>
      <Keyword type="header" order="d1e2595349">
         <Level1>Vendor managed inventory</Level1>
         <Level2>introduction</Level2>
      </Keyword>
      <Keyword type="header" order="d1e2595354">
         <Level1>Vendor managed inventory</Level1>
         <Level2>VMI</Level2>
      </Keyword>
   </Header>
   <AimSection>
      <Keyword type="unknown" order="d1e2595360">
         <Level1>VMI</Level1>
         <Level2>introduction</Level2>
      </Keyword>
      <Paragraph>Vendor managed inventory is an inventory management method
		according to which the supplier usually manages the inventory of their customer
		or subcontractor. Sometimes, the supplier manages the supply planning as well.
		Alternatively, the customer manages the inventory but the supplier is
		responsible for supply planning. Inventory management or inventory planning can
		also be subcontracted to a logistics service provider (LSP) For more information, refer to <Link href="/baanerp/wh/onlinemanual/000575" role="manual">Logistic Service Providers (LSP) - Packaging Item Registration</Link>.</Paragraph>
      <Paragraph>The supplier or the customer own the inventory delivered by the
		supplier. Often, the ownership of the inventory changes from the supplier to
		the customer when the customer consumes the inventory, but other ownership
		transfer moments occur, which are laid down by contract.</Paragraph>
      <Paragraph>Vendor managed inventory reduces internal costs associated with
		planning and procuring materials, and allows the vendor to better manage their
		inventory through higher visibility to the supply chain.</Paragraph>
   </AimSection>
   <GeneralSection ID="000458_scenarios_intro">
      <SectionTitle>VMI scenarios</SectionTitle>
      <Keyword type="section" order="d1e2595377">
         <Level1>VMI</Level1>
         <Level2>scenarios</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595382">
         <Level1>Scenarios</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <Paragraph>Though perfectly adjustable to all types of industries, LN 's VMI
		solution focuses on the <Link href="/baanerp/td/glossary/glossary#SupplyChain_td" role="glossary">supply chain</Link> of the electronics industry. In practice,
		you can distinguish numerous scenarios, all labeled VMI, in which the
		supplier's role goes beyond mere selling and delivering goods to the customer. For more information, refer to <Link href="/baanerp/wh/onlinemanual/000462" role="manual">Overview of VMI business scenarios</Link> 
         <Link href="/baanerp/wh/onlinemanual/000575" role="manual">Logistic Service Providers (LSP) - Packaging Item Registration</Link>.</Paragraph>
   </GeneralSection>
   <GeneralSection ID="000458_parties_involved">
      <SectionTitle>Parties involved</SectionTitle>
      <Keyword type="section" order="d1e2595401">
         <Level1>VMI</Level1>
         <Level2>role</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595406">
         <Level1>VMI</Level1>
         <Level2>party</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595411">
         <Level1>Role</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595416">
         <Level1>Party</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <List>
         <ListIntro>In most VMI scenarios, you can distinguish the following
		  parties:</ListIntro>
         <ListItem>Supplier</ListItem>
         <ListItem>Contract manufacturer</ListItem>
         <ListItem>Customer</ListItem>
      </List>
      <Paragraph>The supplier supplies components to the contract manufacturer.
		The contract manufacturer uses the components to produce items for the
		customer. Therefore, the contract manufacturer plays two roles: the customer of
		the (component) supplier, and the supplier of the (item) customer. In LN, the flow between
		the component supplier and the contract manufacturer, and the flow between the
		contract manufacturer and the end item customer is defined as a supplier -
		customer relation. The contract manufacturer is defined as customer of the
		component supplier and as supplier of the end item customer.</Paragraph>
      <Paragraph>Some scenarios involve yet another party, the logistics service
		provider or LSP. The LSP performs various activities related to warehouse
		management.</Paragraph>
      <GeneralSection ID="000458_VMI_roles_responsibilities">
         <SectionTitle>Roles</SectionTitle>
         <Keyword type="section" order="d1e2595437">
            <Level1>VMI</Level1>
            <Level2>role</Level2>
         </Keyword>
         <Keyword type="section" order="d1e2595442">
            <Level1>Role</Level1>
            <Level2>VMI</Level2>
         </Keyword>
         <Keyword type="section" order="d1e2595447">
            <Level1>Responsibilities</Level1>
            <Level2>VMI</Level2>
         </Keyword>
         <List>
            <ListIntro>All of these scenarios revolve around the following
			 questions:</ListIntro>
            <ListItem>Who performs warehouse management?</ListItem>
            <ListItem>Who performs supply planning?</ListItem>
            <ListItem>Who is the financial owner of the goods?</ListItem>
         </List>
         <List>
            <ListIntro>In LN, you must define the customer role or the supplier role for your
			 organization. Also, various aspects of these roles are laid down in the terms
			 and conditions of the contracts between business partners, which are defined by <Link href="/baanerp/tc/glossary/glossary#000001" role="glossary">item</Link>, <Link href="/baanerp/tc/glossary/glossary#BusinePartne_tc" role="glossary">business partner</Link>, and <Link href="/baanerp/tc/glossary/glossary#Warehouse_tc" role="glossary">warehouse</Link>. To set up VMI functionality, see:</ListIntro>
            <ListItem>
               <Link href="/baanerp/wh/onlinemanual/000490" role="manual">VMI customer role - setup</Link>
            </ListItem>
            <ListItem>
               <Link href="/baanerp/wh/onlinemanual/000491" role="manual">VMI supplier role - setup</Link>
            </ListItem>
         </List>
         <Paragraph>In a full VMI scenario, for example, the supplier is
		  responsible for supply planning and warehouse management. Supply planning is
		  based on the customer's outstanding sales orders and forecasted demand. For
		  further information about LN functionality that supports supply planning by the supplier, refer
		  to the <DocRef>User's Guide for Supply Planning by Supplier, (U9482A
		  US)</DocRef>.</Paragraph>
         <Paragraph>The supplier is the owner of the goods until the customer
		  consumes them. At the moment of consumption, the customer becomes the owner and
		  payment is due. Typically, the customer uses a <Link href="/baanerp/tf/glossary/glossary#000008" role="glossary">self-billing</Link> process to make aggregated payments at fixed
		  intervals, such as once a month.</Paragraph>
         <Paragraph>The supplier uses sales orders or <Link href="/baanerp/td/glossary/glossary#SalesSchedu_td" role="glossary" Update="No">sales schedules</Link> to sell their goods to the
		  customer, which correspond to the customer's purchase orders or <Link href="/baanerp/td/glossary/glossary#000000000000011" role="glossary">purchase schedules</Link>.</Paragraph>
      </GeneralSection>
      <ExampleSection ID="000458_example_fullVMI_scenario">
         <SectionTitle>Example</SectionTitle>
         <Paragraph>The supplier knows their customer's requirements and plans to
		  supply 1000 items X once a week. The supplier delivers item X at warehouse A,
		  which is located at the customer's, but managed by the supplier. The customer
		  performs a call-off for the issue of item X from warehouse A at regular
		  intervals; the supplier then outbounds the goods and brings them to the
		  customer's production plant. This is the moment the customer becomes the owner
		  of the goods and payment is due.</Paragraph>
      </ExampleSection>
   </GeneralSection>
   <GeneralSection ID="000458_VMI_warehouse_intro">
      <SectionTitle>VMI warehouse</SectionTitle>
      <Keyword type="section" order="d1e2595505">
         <Level1>VMI</Level1>
         <Level2>warehouse</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595510">
         <Level1>Warehouse</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <Paragraph>In the previous example, warehouse A is the <Link href="/baanerp/wh/glossary/glossary#000471" role="glossary">VMI warehouse</Link>. In the VMI scenarios that LN supports, the VMI
		warehouse is defined in the customer's ERP system and the supplier's ERP
		system.</Paragraph>
      <Paragraph>For the party responsible for warehouse management, the VMI
		warehouse is defined as a regular warehouse that supports full warehouse
		functionality. For the party not responsible for warehouse management, the VMI
		warehouse is defined as an <Link href="/baanerp/wh/glossary/glossary#000467" role="glossary">administrative warehouse</Link>.</Paragraph>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>Administrative warehouse is not one of the warehouse types
		  that you can define in LN. To define a warehouse as an administrative warehouse, in the <GUIRef href="/baanerp/wh/wmd/whwmd2500m000" role="session">Warehouses (whwmd2500m000)</GUIRef> session, clear the <Link href="/baanerp/wh/wmd/whwmd2500m000#tcmcs003.imgt" role="formfield">Inventory Management</Link> check box.</Paragraph>
      </Note>
      <Paragraph>Therefore, in the previous example, warehouse A is modeled as a
		regular warehouse in the supplier's ERP system. In the customer's ERP system,
		warehouse A is modeled as an administrative warehouse.</Paragraph>
      <Paragraph>Because the VMI warehouse and the administrative warehouse
		reside in separate systems managed by different parties, they are not
		synchronized.</Paragraph>
      <Paragraph>For more information, refer to <Link href="/baanerp/wh/onlinemanual/000470" role="manual">VMI warehouse settings</Link>.</Paragraph>
   </GeneralSection>
   <GeneralSection ID="000458_ownership">
      <SectionTitle>Inventory ownership</SectionTitle>
      <Keyword type="section" order="d1e2595549">
         <Level1>Inventory ownership</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <Keyword type="section" order="d1e2595554">
         <Level1>Ownership</Level1>
         <Level2>VMI</Level2>
      </Keyword>
      <Paragraph>In non-VMI supply chains, a customer becomes the owner of the
		goods they have purchased when the customer receives them in their warehouse.
		In various VMI scenarios, the supplier remains the owner of the goods after
		delivery in the VMI warehouse until the customer uses the goods.</Paragraph>
      <Paragraph>The moment at which the ownership of the goods changes from the
		supplier to the customer is laid down in the contract drawn up between the
		supplier and the customer. In the <GUIRef href="/baanerp/tc/trm" role="module">Terms and Conditions</GUIRef> module of the <GUIRef href="/baanerp/tc" role="package">Common</GUIRef> package, you can
		define ownership change rules. For more information, refer to <Link href="/baanerp/wh/onlinemanual/000461" role="manual">Inventory ownership in Warehouse Management</Link> and <Link href="/baanerp/tc/onlinemanual/000500" role="manual">Overview of terms and conditions</Link>.</Paragraph>
   </GeneralSection>
   <RelatedTopics>
      <SectionTitle>Related topics</SectionTitle>
      <RelTopic>
         <Link href="/baanerp/wh/onlinemanual/000462" role="manual">Overview of VMI business scenarios</Link>
      </RelTopic>
      <RelTopic>
         <Link href="/baanerp/wh/onlinemanual/000575" role="manual">Logistic Service Providers (LSP) - Packaging Item Registration</Link>
      </RelTopic>
      <RelTopic>
         <Link href="/baanerp/wh/onlinemanual/000490" role="manual">VMI customer role - setup</Link>
      </RelTopic>
      <RelTopic>
         <Link href="/baanerp/wh/onlinemanual/000491" role="manual">VMI supplier role - setup</Link>
      </RelTopic>
   </RelatedTopics>
</ManualTopic>