| Case 5: A steel making company manufacturing steel sheets
Illustrative Scenario: Regular supply to a Furniture company - around 30 SKUs with a lead time of eight weeks
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Before |
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After VMI Implementation
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- The customer placing order every month
- Customer also required to give three months of forecast
- Due date performance less than 80%
- After forecasting the customer was forced to lift the material, even when they did not require
- The customer having 2 sources, the share of this company 50%
- Quarterly negotiations only on price. Severe pressure to reduce price
- Customer carrying average three months inventory
- Rampant stock-outs, many emergency calls, customer missing many urgent orders
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- No more orders, the lead time to customer practically zero
- Forecast only if customer expects any surge or dip in demand
- Due date performance close to 100%
- No forecast, hence no pressure on the customer to lift material not immediately not required
- 100% share of business to this company
- Quarterly discussion on benefits and benefit sharing
- Customer inventory came down to an average ten days consumption
- No more stock-outs, customers business increased by 10%
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