Application of Vendor Managed Inventory in a Deodorant Manufacturing Company

Abstract

The competition in the Fast-Moving Consumer Goods (FMCG) industry has increased significantly in recent years from both domestic and worldwide markets. Manufacturers must prepare enough stock to support fluctuation demand from clients. However, overstock directly affects manufacturing costs. This research applies the Vendor Managed Inventory (VMI) concept to aerosol deodorant products produced by suppliers to improve inventory management aiming at decreasing the storage cost of finish goods at the manufacturer s warehouse as well as raw material and packaging costs at the supplier s warehouse. The result after applying VMI shows that the average storage cost in the manufacturer s warehouse decreases from 28.7% to 19.4% and the storage cost in the supplier s warehouse decreases 15.36%, 15.17%, and 23.09% in September until November 2020, respectively. Also, the supplier can keep the target of service level at 95% order fulfilment and the average service level increases from 98.2% to 98.9%.