VMI – Vendor Managed Inventory Consignment Warehouse (Continental Automotive)
VMI (Vendor Managed Inventory) basic idea is to give Supplier the responsibility for inventory management. Thus, VMI is a consignment process in which the Continental Supplier is free to make his own decision regarding the delivery date, frequency, and quantity as long as Supplier maintains the inventory level required by Continental. Continental defines a minimum and maximum stock level, transmits gross demands in form of a Delivery Schedule and the inventory levels. With this data, Supplier resupplies Continental. In addition, Supplier obtains a receipt for the restocked inventory (e.g. POD by the forwarder or at latest with the Inventory Report) when the Contract Product is stored at a designated place, which is normally close to or within a Continental production site.
As a part of the consignment process, Supplier understands and agrees that title to and ownership in the Contract Product together with risk of loss for the Contract Product shall pass to Continental only upon withdrawal of Contract Product from the consignment stock. Continental can withdraw the stock without prior notification. The Supplier receives a notice of the withdrawn quantity – usually with the Inventory or Movement Report – and in case of SBI Supplier is informed about payments to be received according to withdrawn quantities and payment terms.
Continental will provide the Supplier the following information concerning inventory and requirements:
- The Supplier will receive via EDI messages of Delivery Schedules and Inventory Information. Note that quantities in the Delivery Schedules are in the case of VMI gross requirements (production requirements). This means that the quantities cited do not
consider any stock levels or have undergone any lot sizing and it is the Supplier who is authorized to manage the inventory and responsible to ensure resupply. In this process, gross requirements do not include any planning times or fences.
- In addition to Delivery Schedules Supplier will receive EDI messages called Inventory Reports. The Inventory Reports inform the Supplier about inventory levels of the consignment stock (free, quality and blocked) as well as include information about movements in consignment inventory (receipts and pulls). According to this information Supplier commits to keep the level/range of inventory within the agreed limits at all times to ensure a stable supply. Supplier shall plan resupply according to the actual and the projected consumption and shall only ship the quantity of Contract Products into consignment that will maintain the consignment stock below the maximum level and must assure on-time shipment so that inventory will not fall below the minimum level.
- The min/max-level of inventory is calculated based on projected requirements for a certain minimum and maximum period of time and may be designated as range of coverage (e.g. two weeks for minimum and four weeks for maximum material coverage). Supplier can calculate a reference level by multiplying the averaged daily requirements (based on the forecasted gross requirement in the Delivery Schedule for the next 90 days including delinquencies / backlog) and the agreed minimum and maximum range of coverage in calendar days.
Continental and Supplier will review technical details (e.g. exact data content of the messages and frequency of data) during the set up of the sourcing model and testing of connection. This is necessary in order to ensure correct processing of information and interpretation.