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Performance outcomes and success factors of vendor managed inventory (VMI)

Marloes J.T. Claassen (IG&H Management Consultants, Woerden, The Netherlands)
Arjan J. van Weele (Department of Technology Management, Eindhoven University of Technology, Eindhoven, The Netherlands)
Erik M. van Raaij (RSM Erasmus University, Rotterdam, The Netherlands)

Supply Chain Management

ISSN: 1359-8546

Article publication date: 26 September 2008

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Abstract

Purpose

The purpose of this paper is to seek to investigate performance outcomes of vendor managed inventory (VMI) from a buyer's perspective and enablers for its successful application.

Design/methodology/approach

Structural equation modelling through Partial Least Squares (PLS) is used to identify relationships between four enablers (information systems, information sharing, information quality, and relationship quality), perceived VMI success, and three outcomes (cost reductions, customer service, and supply chain control).

Findings

Buyer‐perceived VMI success is impacted by the quality of the buyer‐supplier relationship, the quality of the IT‐system and the intensity of information sharing, but not by the actual quality of the information shared. Furthermore, VMI leads to three performance outcomes: higher customer service levels, improved supply chain control and, to a lesser extent, cost reduction.

Research limitations/implications

Although theory stipulates a positive impact of high quality information on the success of VMI, this study shows that the effect of information quality is limited in practice.

Practical implications

The results of the survey show that purchasing managers who invest in the relationship with their suppliers and a good IT infrastructure are more likely to get better results from a VMI implementation. Furthermore, this paper shows that while most managers expect major cost reductions when implementing VMI, benefits primarily come from improved service levels.

Originality/value

The study provides empirical evidence of why VMI in practice does not achieve all the benefits claimed in theory.

Keywords

Citation

Claassen, M.J.T., van Weele, A.J. and van Raaij, E.M. (2008), "Performance outcomes and success factors of vendor managed inventory (VMI)", Supply Chain Management, Vol. 13 No. 6, pp. 406-414. https://doi.org/10.1108/13598540810905660

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited