The Difference Between Walmart And Procter Gamble Information Technology Essay

The Difference Between Walmart And Procter Gamble Information Technology EssayIn recently 1980s, Procter Gamble, the manufacturer and Wal-Mart, the distributor started to practice vendor managed scrutinise (VMI) union. Their victor on increasing efficiency of supply chain immediately trumpeted otherwise organization like Campbell Soup, Johnson Johnson, GlaxosmithklineElectrolux ItaliaNestle and Tesco, and withal Boeing and Alcoa, to apply VMI approach.VMI is a melodic phrase model which is first implemented and common among grocery industry. Vendor or supplier usually refers to manufacturer.Instead of having the guests, often distributors, to place rank to vendors,, as in traditional replenishment process, VMI created a value added portion in which vendors have full responsibility on maintaining agreed level of inventories for distributors. by VMI softwargon, manufacturers either able to admonisher and access distributors actual muniment level, or distributors will sen d piggish revenue and enumeration data via Electronic info Interchange (EDI) or internet on pre-arrange schedule, typically on casual basis. Manufacturers then make resupply decisions regarding order quantities, timing, and shipping based on in return agreed stock levels, fill rates, and transaction costs.Yes, the research worker agreed that VMI tenders authoritative benefits to an organization. thitherfore, exploring the benefits arise from implementation of VMI, would be the next focus for this paper. The paper too objectives to examine the dis favours involved in the application of VMI for twain distributors and manufacturers.2.0 VENDOR MANAGED documentAdvantagesThe advantages were introduced in enclosures of manufacturers, distributors, not to forget dual benefits.2.1.1 For manufacturersincrease productivenessMore efficient own inventory controlIncreased customer relationshipImproved market abbreviationIncreased sales equal reductionVMI Benefits for ManufacturersFi gure 1 VMI Benefits for ManufacturersSource The ResearcherCost reduction system cost, operating cost, transportation cost and many more(prenominal) atomic number 18 decreased because of lesser order problem like severeness data, and diminish unexpected order.Increased salesThis is the quickest advantage as sales could be rise to 5-25%. This mainly due to increase sales of their customers, contributed by lesser stock out problems, together with improved product mix, as a result of better demand visibility. Market share withal change magnitude because distributors could experience start out cost, greater profitability, and improved service from manufacturers. other factor is better collaborative planning for special sales much(prenominal) as promotion.Improved market analysisMore frequent and train communication go awayed better insight in customer demand. This enables easier market analysis and created opportunities to provide other value added services.Increased customer relationshipManufacturers secured its customers by providing continuous supply, avoiding out of stock problems. VMI excessively assured long term relationship together with steady and predictable income as long as manufacturers still carrying the task of maintaining a pre obstinate stock for its customers, often a distributor.More efficient own inventory controlWith the ability to monitor and keep track its customers actual sales and inventory, manufacturers able to forecast demand, and so better plan and control its own inventory, for instance, keeping just equal stock for manufacturing and resupply for its customer. Increased communication also allows promotion to be considerably corporated into inventory plan.Increased productivityManufacturers productivity is increased because observe customers stock regularly enable manufacturers to control its own inventory more efficiently, thus manufacturing operations could be schedule more productively.2.1.2 For distributorsImproved serviceIncreasedsalesCost savingLesser stock-outLower inventory levelVMI Benefits for ManufacturersFigure 2 VMI Benefits for DistributorsSource The ResearcherLower inventory levelManufacturers have greater responsibility to ensure availability of inventories, by ordering replenishment when inventories fall below order point. Frequent check over of inventories and demand information enable manufacturers to more accurately control star sequence component of order point calculations, hence reducing base hit stock.Lesser stock-out or shortageThe theory and reasons is just the same as for reducing safety stock and inventory level, which is automatic replenishment by supplier before stock-out, and better order calculation due to increased visibility of actual demand. Having manufacturers to monitor its own items also allows better suffice to unexpected demand compared to typical distributors managing bulks of items from different manufacturers.Cost savingAdministration cost is reduced . Since manufacturers in charge of stock replenishment, the cost involves for managing replenishment, generating buy order and other administration task is eliminated. Distributors will then require lesser time and effort in ordering. Cost involved in bad or wrong order is eliminated too. VMI also decreased cost of carrying stock.Increased salesVMI leads to fewer out-of-stock situations. This simply means higher sales, as lesser sales opportunities are lost, and customer loyalty is improved. Increased visibility in demand ensured the right products always getable at right time and right place. Frequent communication also allow better collaborations with suppliers in planning for new product introduction, promotions, and exceptional demand, allowing distributors to enjoy full advantage of special sales opportunities.Improved serviceHaving ripe items at correct moment improved overall service level. Manufacturers practicing VMI also keen to provide better service to distributors.2. 1.3 Dual BenefitsIn addition to the above advantages, both manufacturers and distributors benefit from reduce of supply chain. Human data entry errors were avoided through and through with(predicate) computer to computer communication, which also improve processing speed. Next, overhead is displace due to machine-controlled VMI. Another consequence would be stronger ties and true partnership amongst manufacturers and distributors. Furthermore, timing of purchase orders was stabilized on a predefined basis, for showcase once weekly purchase order cycle.DisadvantagesThe researcher also identify some disadvantages. Firstly, manufacturers might need additional effort and cost to set out resupply activities which is previously carried out by distributors themselves. Therefore, manufacturers must guaranteed substantial amount of gross profit and sales to cover those extra expenses.Secondly, since distributors are excluded from forecasting demand, inaccurate forecast might occur.In t erms of distributors, dependency on whizz source of supply gives disadvantages when suppliers unable to meet its commitment. Distributors also faced emf in losing confidential information since manufacturers are given access to its data. There is also possibility of job losing as replenishment tasks are transferred fend for to manufacturers.Implementing VMI also means distributors unable to enjoy bulk purchase discount, promotion, and forward buying.Another risk is that lacking of cast asided information technology could results in outdated and incorrect information sharing. Besides cost of technology, application of VMI also involved cost of prep and changing organization.Moreover, the success of VMI is hugely determined by the strength of relationship between manufacturers and distributors. For instance, lack of trust in data exchange could leads to ineffective implementation, including inventory invisibility and inventory imbalance.Since VMI increased dependency on both par ties, switching cost is raised and these created difficulties in switching. Flexibility is blemish through VMI because special events or promotions required early communication in order to eliminate replenishment mistake.The next advert is that VMI which encouraged lower inventory contributed to loss of shelf space at distributors selling area. This decreases attention of their buyers, hence market share are loss.However, they are ways to overcome these disadvantages. Take the above example, shelf space could be filled with other items from same vendor. Furthermore, achieving unwashed agreement before applying VMI would creates mutual trust, therefore strengthens relationship and partnership between manufacturers and distributors, thus better monetary value and transaction, resulted in better service to the end customers, which will then dumbfound significant benefits for both parties.3.0 CONCLUSIONProcter Gamble and Wal-Mart appears to be the pioneer and reduce of VMI, a su pply chain practice which is popularized among grocery industry since late 1980s.As oppose to traditional business model where distributors initiate purchasing order, buying decision in VMI are shifted back to vendors, often manufacturers. This is an automated process where manufacturers automatically make resupply decision, ensuring certain amount of stock is available for distributors to meet consumer demand. Manufacturers are given access to real-time sales and inventory level, where electronic data will be sent by distributors to manufacturers through EDI or internet. Under VMI partnership, both manufacturer and distributor are articled by agreement which determines information like inventory level, refill rates, cost, and shipping.The researcher agreed that VMI created numerous advantages for both manufacturers and distributors. Examples include increased sales, cost reduction, lower inventory level, lesser stock-out, improved service, improved productivity, improved market a nalysis, shortening of supply chain, improved processing speed, stronger partnership and many more.Nevertheless, VMI have disadvantages too. These incorporate additional effort and cost for manufacturers, inaccurate demand forecast, dependency on single source of supply, loss of confidential information, loss of job, loss of purchase discount, outdated and incorrect information sharing due to lacking of advance technology, cost of training, changing organization, increased dependency, increased switching cost, loss of flexibility, loss of shelf space, and loss of market share.As conclusion, the researcher recognized that VMI could be structured properly in order to maximize its advantages and minimize its disadvantages. To illustrate, soundly flow of information is key to success in VMI application. Thus, it is necessary to allow information sharing by ensuring an open communication channel. Implementing a well-structured VMI also required good understanding of VMI as well as train ing of staff. Other measures to avoid VMI failure includes clarify expectation, and achieve an agreement between manufacturers and distributors regarding factors such as lead time, cost, and information sharing.