n the context of the Case above, what are the critical factors, that have contributed to the successful implementation of VMI system and the consequent reduction in Inventory holding in MSIL?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Maruti Suzuki India Limited (MSIL) – Vendor Managed Inventory (VMI)Maruti’s approach to Vendor Managed Inventory (VMI) system is through strategic partnership with it’s vendors. It supports collaborative planning, mandated cost and activity transfer to the suppliers, and automated replenishment. Collaborative planning and related information sharing with vendors are the prerequisites of VMI as in their absence, the supplier cannot have the visibility of production plan and therefore, cannot be expected to maintain and manage inventory in a blind situation of planning. Vendors are mandated to own the activity and costs related to management of inventory even at the buyer (MSIL) site. Automated replenishment system is the final objective of any VMI system, in which the execution against the replenishment strategy is done automatically through an IT- enabled system on the basis of daily changes in inventory and demand at the replenished site. For the VMI system to operate, Maruti needs to focus on accurate data sharing with it’s vendors, utilize business intelligence systems to support automated replenishment. Based on continuous monitoring and joint effort, some of the initial bottlenecks could be overcome. To tackle the problem of material accumulation due to multiple sourcing, loss of procurement information and to help achieve systematic levelized production with synchronized supplies, “e-Nagare” system was implemented in January 2003. Nagare means drum in local language. e-Nagare is an electronic version of Kanban system, which has helped in reducing the average inventory through Just-in-Time philosophy. A typical planning system involves making plans at 3 important levels : i) an annual production plan, ii) a fortnight production plan involving a plan each on 1st and 15th of the month followed by a firm delivery
Question :
In the context of the Case above, what are the critical factors, that have contributed to the successful implementation of VMI system and the consequent reduction in Inventory holding in MSIL?
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