given. For example, since the purchasing functionality is enabled
by technical infrastructure, standard product identification and
an integrated IT system must be put in place. And for those
organizations that consider purchasing to be one of their core
competencies, the benefits of a VMI process may not outweigh
its costs, since it is just this capability that is given away. For
both parties in the supply chain, the quality of the relationship,
manifested by shared information, will determine success. Lack
of trust between trading partners will doom their VMI initiative.
For the supplier, the aim of VMI should be to integrate key
customers into the supply chain, and this only will make sense if
those key customers make up a high percentage of the vendor’s
sales figures. Since VMI deploys automatic replenishment logic,
the products should be standardized and ordered repeatedly,
product growth or decline should not be excessive (meaning the
requirement patterns are stable), and it should be safe to assume
that demand will be repetitive and not occur spontaneously.
Finally, it is no surprise that cost plays a crucial role. Where
the transactional costs for order processing and production
planning are high, the greater the reduction in total order
costs, the higher the benefits. This is most frequently the case
when the buyer’s total carrying cost is higher relative to that
of the supplier.