Empirical Evaluation of VMI: Two Ways to Benefit

The management of interorganizational material and information flows (supply chain management or SCM) has emerged during the last two decades as an increasingly relevant perspective and a set of tools for companies in various industries. One particular way of employing SCM is to adopt specific supply chain collaboration models, such as the vendor-managed inventory (VMI) approach. Interestingly, supply chain collaboration models, and VMI in particular, have been subject of only little empirical research. There is a clear lack of studies examining the phenomenon in multiple industries from the point of view of both parties – suppliers and buyers. This paper evaluates the application and impact of VMI by means of a comparative multiple-case study with an exploratory stance. Data, both qualitative and quantitative, are drawn from five supplier-buyer VMI-dyads representing different kinds of industrial settings. We observe that while considered successful in all the cases examined, VMI did not invariably result in operational benefits. We propose that the companies have adopted two different ways to take advantage of VMI: the collaboration-centric and the service-centric mode. While in some dyads buyers and suppliers jointly seek system level improvements, in the others VMI is more of a tool for the buyers to enhance efficiency of their purchasing operations and for the suppliers to offer a service to the buyers in order to differentiate from competition. The results suggest different flavors within the application of VMI, and more generally, within the SCM perspective