Seamlessly Execute Vendor-Managed Inventory Using SAP APO 7.0 and SAP ECC 6.0
- by Manoj Ambardekar, Solution Architect
- September 15, 2010
Companies who have vendors manage the inventory in their stores for specific stock keeping units often opt to use Vendor-Managed Inventory (VMI). VMI improves customer service, reduces inventory requirements, and improves customer retention. Discover how to seamlessly execute VMI across demand planning, Supply Network Planning, and sales and distribution.
Vendor-Managed Inventory is an inventory management system in which the vendor monitors sales and inventory to ensure customers receive replenishment orders as needed. The sales data gathered from point-of-sale terminals or store-level inventory can be transmitted directly to the vendor’s IT system using Electronic Data Interchange.
Vendor-Managed Inventory (VMI) helps with collaboration between a vendor and a customer using Electronic Data Interchange (EDI) to gather data, such as on-hand inventory, which is then used to create an inventory plan. This inventory plan directs how the vendors create sales orders to replenish the customer’s stock. With VMI, the vendor takes over the job of the customer’s buyer and saves the customer time and money by placing replenishment orders for them.
VMI spans multiple systems, including SAP Advanced Planning & Optimization (SAP APO), SAP ERP Central Component (SAP ECC), and EDI. Recently, SAP APO 7.0 and SAP ECC 6.0 have made it easier to execute the VMI process with EDI in a seamless manner with the time series mapping feature, which I explain later in this article.
This article is based on SAP ECC 6.0 and SAP SCM 7.0. You can implement VMI in other versions, but time series mapping is available only in these versions. In my scenario, a major retailer called MJA Corporation (the customer) uses a legacy ERP system to track inventory. MJA plans to execute the VMI process with ABC Limited (the vendor), a global company. ABC uses SAP SCM 7.0 for global planning and SAP ECC 6.0 for reporting. The companies plan to use EDI to exchange data to and from MJA’s legacy ERP system and ABC’s SAP environment.
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