How inventory consignment programs can improve supply chain performance: a process oriented perspective
Malhotra, Manoj K.; Mackelprang, Alan W.; Jayaram, Jayanth
Abstract
Inventory Consignment (IC) has largely been viewed as a method of shifting the ownership and cost burden of inventory from buyer to supplier to benefit the buyer. This primarily accounting based viewpoint has largely ignored process changes that can occur for both the buyer and supplier. This study addresses this gap in the extant literature by examining IC from a process perspective by specifically addressing: (1) the implementation issues in an IC program for both buyers and suppliers and (2) the financial and operational benefits from IC for both buyers and suppliers. Using the case study methodology, we examined three firms that had varying degrees of involvement and roles in IC programs. Based on our detailed work with these three firms and their supply chain linkages, we offer a series of propositions to demonstrate that IC is not just an accounting issue, but also a management practice that requires a series of process changes in order to be successful. These process changes in turn provide operational benefits for both buyers and suppliers via the mechanism of increased demand visibility to suppliers. Through this approach, this study makes a contribution beyond what has been examined in the prior literature which has mostly dealt with IC as an accounting based inventory management issue.
Keywords
References
Ashenbaum, B. (2006). Optimizing MRO inventory management. Arizona: CAPS Research. Critical Issues Report. Retrieved in 30 October 2006, from http://www.capsresearch.org/Publications/pdfs-protected/cir082005.pdf
Butler, M. J., Sweeney, M., & Crundwell, D. (2009). Facility closure management: the case of Vauxhall Motors Luton. International Journal of Operations & Production Management, 29(7), 670-691. http://dx.doi.org/10.1108/01443570910971379.
Danese, P. (2004). ‘Beyond vendor managed inventory: the glaxosmithkline case,’ supply chain forum. International Journal, 5(2), 32-39.
DeWalt, K. M., & DeWalt, B. R. (2002). Participant observation: a guide for fieldworkers. Walnut Creek: AltaMira Press.
Dong, Y., & Xu, K. (2002). A supply chain model of vendor managed inventory. Transportation Research Part E, Logistics and Transportation Review, 38(2), 75-95. http://dx.doi.org/10.1016/S1366-5545(01)00014-X.
Elvander, M. S., Sarpola, S., & Mattsson, S.-A. (2007). Framework for characterizing VMI Systems. International Journal of Physical Distribution & Logistics Management, 37(10), 782-798. http://dx.doi.org/10.1108/09600030710848914.
Holweg, M., Disney, S., Holmström, J., & Småros, J. (2005). Supply chain collaboration: making sense of the strategy continuum. European Management Journal, 23(2), 170-181. http://dx.doi.org/10.1016/j.emj.2005.02.008.
Johnson, A., & Sackett, R. (1998). Direct systematic observation of behavior. In H. R. Bernard (Ed.), Handbook of methods in cultural anthropology (pp. 301-332). Walnut Creek: AltaMira Press.
Kauremaa, J., Småros, J., & Holmström, J. (2009). Patterns of vendor-managed inventory: findings from a multiple-case study. International Journal of Operations & Production Management, 29(11), 1109-1139. http://dx.doi.org/10.1108/01443570911000159.
Kraemer, K. L., Dedrick, J., & Yamashiro, S. (2000). Refining and extending the business model with information technology: dell computer corporation. The Information Society, 16(1), 5-21. http://dx.doi.org/10.1080/019722400128293.
Lee, H. L., Padmanabhan, V., & Whang, S. (1997). The bullwhip effect in supply chains. Sloan Management Review, (38), 93-102.
Maestrini, V., Luzzini, D., Shani, A. B. R., & Canterino, F. (2016). The action research cycle reloaded: conducting action research across buyer-supplier relationships. Journal of Purchasing and Supply Management, 22(4), 289-298. http://dx.doi.org/10.1016/j.pursup.2016.06.002.
Micheau, V. A. (2005). How boeing and alcoa implemented a successful vendor managed inventory program. Journal of Business Forecasting, 24(1), 17-19.
Niranjan, T. T., Wagner, S. M., & Nguyen, S. M. (2012). Prerequisites to vendor-managed inventory. International Journal of Production Research, 50(4), 939-951. http://dx.doi.org/10.1080/00207543.2011.556153.
Oke, A., & Gopalakrishnan, M. (2009). Managing disruptions in supply chains: a case study of a retail supply chain. International Journal of Production Economics, 118(1), 168-174. http://dx.doi.org/10.1016/j.ijpe.2008.08.045.
Pohlen, T. L., & Goldsby, T. J. (2003). VMI and SMI programs: how economic value added can help sell the change. International Journal of Physical Distribution & Logistics Management, 33(7), 565-581. http://dx.doi.org/10.1108/09600030310499268.
Roy, R., Souchoroukov, P., & Shehab, E. (2011). Detailed cost estimating in the automotive industry: data and information requirements. International Journal of Production Economics, 133(2), 694-707. http://dx.doi.org/10.1016/j.ijpe.2011.05.018.
Rungtusanatham, M., Rabinovich, E., Ashenbaum, B., & Wallin, C. (2007). Vendor-owned inventory management arrangements in retail: an agency theory perspective. Journal of Business Logistics, 28(1), 111-135. http://dx.doi.org/10.1002/j.2158-1592.2007.tb00234.x.
Schensul, S. L., Schensul, J. J., & LeCompte, M. D. (1999). Essential ethnographic methods: observations, interviews, and questionnaires (Vol. 2). Walnut Creek: AltaMira Press.
Spradley, J. P. (1980). Participant observation. Belmont: Wadsworth.
Tate, W. L., Ellram, L. M., Bals, L., & Hartmann, E. (2009). Offshore outsourcing of services: an evolutionary perspective. International Journal of Production Economics, 120(2), 512-524. http://dx.doi.org/10.1016/j.ijpe.2009.04.005.
Tzeng, S., Chen, W., & Pai, F. (2008). Evaluating the business value of RFID: evidence from five case studies. International Journal of Production Economics, 112(2), 601-613. http://dx.doi.org/10.1016/j.ijpe.2007.05.009.
Valentini, G., & Zavanella, L. (2003). The consignment stock of inventories: industrial case in performance analysis. International Journal of Production Economics, 81-82, 215-224. http://dx.doi.org/10.1016/S0925-5273(02)00300-6.
Waller, M., Johnson, M. E., & Davis, T. (1999). Vendor-managed inventory in the retail supply chain. Journal of Business Logistics, 20(1), 183-203.
Wallin, C., Rungtusanatham, M., & Rabinovich, E. (2006). ‘What is the ’right’ inventory management approach for a purchased item?’. International Journal of Operations & Production Management, 26(1), 50-68. http://dx.doi.org/10.1108/01443570610637012.
Wang, S. P., Lee, W., & Chang, C. Y. (2012). Modeling the consignment inventory for a deteriorating item while the buyer has warehouse capacity constraint. International Journal of Production Economics, 138(2), 284-292. http://dx.doi.org/10.1016/j.ijpe.2012.03.029.
Watson, E. (2005). Nestle switches to vendor managed inventory with Tesco. Food Manufacture, 80(8), 20.
Xu, K., Yin, R., & Dong, Y. (2016). Stockout recovery under consignment: the role of inventory ownership in supply chains. Decision Sciences, 47(1), 94-124. http://dx.doi.org/10.1111/deci.12198.
Yin, R. K. (1994). Case study research: design and methods (2nd ed.). Thousand Oaks: Sage Publications.
Yu, Y., Wang, Z., & Liang, L. (2012). A vendor managed inventory supply chain with deteriorating raw materials and products. International Journal of Production Economics, 136(2), 266-274. http://dx.doi.org/10.1016/j.ijpe.2011.11.029.
Facebook
Google+
Twitter
LinkedIn
Mendeley
StumbleUpon
CiteULike
Reddit
Email