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.
Key Concept

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.

Manoj Ambardekar

Manoj Ambardekar has more than 20 years of IT and manufacturing experience with firms such as IBM, Infosys, PricewaterhouseCoopers, and Siemens Information in the CPG, brewing, and process industries. He has more than 14 years of experience with SAP APO and SAP ECC with specialization in logistics. He has played multiple roles as functional and technical lead as well as project manager. He has implemented SAP applications at more than 12 large- and medium-sized projects since 1998. Manoj is a chemical engineer certified in production and inventory management (CPIM) from APICS – USA, and holds a master’s of engineering (industrial) degree from B.I.T.S. in Pilani, India. Manoj works on both large and SME clients to implement SAP as both a configuration SME in APO/ECC PP-MM/Solution Manager and project manager/team lead. He specializes in supply chain management solutions using software such as SAP APO, SAP SCM, SAP ECC, SAP Solution Manager, and business intelligence for North American clients.

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