A framework for implementing the VMI model in an MRO partnership

University essay from Högskolan i Gävle/Avdelningen för Industriell utveckling, IT och Samhällsbyggnad; Högskolan i Gävle/Avdelningen för Industriell utveckling, IT och Samhällsbyggnad

Abstract:

Purpose - The purpose of this paper is to investigate the feasibility of implementing the Vendor Managed Inventory (VMI) model in an MRO (maintenance, repair, and operations) partnership, and highlight its potential economic, environmental, and organizational benefits, as well as limitations.

Approach - First, a comprehensive literature review was conducted on fields relevant to VMI. Second, empirical data was gathered from a single exploratory case study with Momentum Industrial, and its customer Stora Enso. Semi-structured interviews were used to gather data from the case companies.

Findings - Results suggest that VMI results in benefits for the supply chain in general, such as reduced administration and inventory costs, improved service levels, reduced information distortion, and improved relationship among partners. For the particular case of VMI in an MRO partnership, improved service levels can be obtained by a reduced risk of production downtime for the customer. Moreover, the implementation of VMI has potential environmental benefits, such as reduced paper use, and higher transportation fill rate. Limitations of implementing VMI include the difficulty in system integration, and information sharing. Trust could be a potential issue that limits information sharing amongst supply chain partners. Moreover, the difference in organizational cultures and policies of partners should be taken into consideration.

Limitations - The study is limited to opinions from one MRO customer in the paper and packaging industry. Even though the questions asked to informants in Momentum and Stora Enso tackled benefits to MRO customers in general, a broader image could have been achieved by interviewing customers from different industries. Moreover, the case companies do not currently adopt VMI in their partnership, so the case study results are based on what they think would be the potential benefits and limitations of implementing VMI in an MRO partnership.

Practical Implications - This paper can serve as a guideline for logistics managers who are considering VMI in an MRO partnership specifically, as it provides them with the benefits and limitations associated with VMI. More generally, any company considering VMI can also benefit from the theoretical framework presented.

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