Vendor Managed Inventory (VMI) is a Supply Chain process in which vendor plays the role of a buyer for the customer in order to get optimum level of inventories and reduced cost. Vendor is responsible for maintaining inventory data of customer and consequently plans replenishment orders on behalf of the customer.
A typical VMI process is depicted below. It is assumed that vendor uses SAP R/3 and SAP APO systems.
VMI process starts with sharing of Inventory and sales data from Customer to vendor through EDI. Inventory data is directly transferred to SNP, whereas sales history is transferred to DP. DP is used to create forecast based on historical data and this forecast is then released to SNP. In most of the cases it is also a possibility that customer directly provides sales forecast values. In that scenario, forecast figures will be directly transferred to DP and to SNP and if it is directly transferred to SNP then vendor’s DP module will not be used for VMI planning.
Once forecast and inventory data is available, SNP heuristic (or Optimizer if required) is run to create supply plan. It creates purchase requisition at customer location and sales order at vendor location.
Then deployment is run to create deployment sales orders and Purchase requisition. In similar way, TLB orders are generated which consequently generate Sales Orders in vendor’s R/3 system.
VMI Process Scenario
In the VMI forecast the frequency to receive new forecasts from a customer is normally daily, however it may vary and frequency may also be weekly.
The steps in detail are explained as below:
Step 1. Copy of IDOC entries into VMI Planning book.
Once an IDOC message is received into APO, it is automatically loaded in a specific APO DP VMI planning area in the key figure “B2B Forecast”.
You may check the IDOC in SAP-APO (transaction WE02) where we can see both inbound and outbound IDOC’s. Please select the concerned IDOC’s here in this case PROACT01 and you will be able to look at IDOCs passed successfully with status 53 into APO.
As customer forecast bucket size is the day, the bucket size of this planning area is the day. The planning book S3_DP_VMI is only used to verify the content of this planning area.
The path is Demand Planning àPlanning à Interactive demand planning
Choose the VMI planning book. The values displayed will be in daily bucket.
We can also choose the monthly VMI planning book view to check the values in monthly bucket.
Step 2: Copy of B2B Forecast key figure from VMI to DP planning area.
After having loaded the VMI planning area, the values stored in the “B2B forecast” key figure are automatically copied from VMI planning area to the DP planning area. As the DP planning area uses a monthly bucket, a conversion of the bucket size from day to month is automatically done during this copy step. This is done for integrating with the main demand plan which is in month bucket.
The “Copy/Version Management” program can be used to manually do the copy of the key figure from one planning area to another. In normal case, this program runs automatically on a daily basis via process chains.
The Key figure copied is B2B forecast
Heuristic Run at Customer Location
B2B Forecast is directly released to SNP planning area at customer location.
After forecast release, location heuristic is run at customer’s location. Heuristic will create Distribution Receipt (Planned) at customer location based on the forecast.
This distribution receipt is in the form of purchase requisition.
This Receipt will create Distribution Demand at supplying plant in the form of VMI sales order.
Deployment can be run as per business need to check whether supply can be made with the available stock. Deployment is run at supplying location.
After Deployment run, Transport Load Builder (TLB) is run to create shipment orders.
As a result of TLB run, TLB VMI sales order and stock transfer orders are generated at supplying plant.
These TLB orders get transferred to SAP ECC through CIF. Same can be viewed in MD04. Such TLB sales order is seen as Customer Order.
This customer order then gets delivered to customer through normal ECC process, so that the whole VMI process cycle completes.
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