Digital Transformation: Smart Supply Chains with Vendor Managed Inventory (VMI) - A Case Study for a medium sized Swedish healthcare company in VMI implementation

University essay from Göteborgs universitet/Graduate School

Author: Xiaoxi Hu; [2021-07-08]

Keywords: VMI; Supply Chain; VMI Implementation; VMI risk; Risk Management;

Abstract: Background &Purpose:Supply chain management (SCM) has become a hot topic in the currentglobal competitive markets that drives many companies to explore,especially in inventory management. Vendor Managed Inventory (VMI) asan SCM method enables all participants in the supply chain to achieve rapiddevelopment and obtained huge benefits. Under the VMI model,manufacturers/distributors give the inventory management responsibility tothe suppliers to increase the inventory efficiency. One Swedish healthcarecompany desire to increase the supply chain resilience and save supply chaincost, especially during the Covid-19 pandemic and would like to implementthe VMI model with its supplier. The two research questions in this thesisare 1) How can a healthcare company in Sweden implement the VMI modelwith its vendor? and, 2) What risks are associated with implementing VMIwith a vendor for a healthcare company in Sweden?Method:This thesis is a qualitative study focus on one single Swedish healthcarecompany. There are ten interviews conducted within the Swedish healthcarecompany and its vendor. The research strategy is to obtain data fromliterature reviews and interviews based on the two research questions andthen compare the similarities and differences for analysis.Results:The implementation process of VMI has summarized in two steps. The firststep is VMI preparation, which includes Choose Product Assortment,Supplier Selection, IT Foundation, VMI Project Team, Risk Analysis. TheSecond step is VMI implementation, which includes Sign VMI Contract,VMI Training and VMI Process Set Up.Based on theoretical and empirical data, the author developed a conceptionalrisk management model for VMI. Through analysis, the author identified 13risk factors in five dimensions. In addition, a new dimension, ChangeManagement, is added to the existing supply chain risk management modelfrom Tang (2006). In this new conceptional model, the risk factors aresupplier relationship, inventory control, lack of resources, supply networkdesign, contract, which belongs to Supply Management. Productdiversification, substitution bundling, and standardization belong to ProductManagement. IT system support belongs to Information Management. Lackof resources, keep frequent and large orders, more responsibility frommarketing belong to Demand Management. Moreover, fear to change, longlead time for employees to learn a new system, and lack of knowledge aboutVMI belong to Change Management.

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