The extended VMI for coordinating the whole supply network

Purpose – To highlight how vendor managed inventory (VMI) can be extended both upstream and downstream in the supply network to co-ordinate the material and information flows among a number of different suppliers, manufacturing and distribution plants (“extended VMI”). Design/methodology/approach – The research is based on data and information gathered during an in-depth case study within the supply network co-ordinated by GlaxoSmithKline, one of the world’s leading research-based pharmaceutical and healthcare companies. Findings – Defines the peculiarities and the requisites of the extended VMI as to: the information flows supporting the relationships among the supply network members; the information systems, supporting the data collection, management, diffusion and elaboration; the performance monitoring system, highlighting the benefits for each supply network member as well as avoiding opportunistic behaviours. Research limitations/implications – The research intends to offer an original contribution to the stream of research on VMI, explaining the peculiarities and the requisites of the extended VMI. Future research should seek to consider the extended VMI in light of some supply chain management (SCM) practices which have emerged in recent years, such as collaborative planning, forecasting and replenishment. Moreover, a second research opportunity lies in investigating the mixes of SCM initiatives – among which is also the extended VMI – needing launch in a perspective of optimisation of the whole supply network. Practical implications – The case reported here and the research findings should offer guidance for managers facing the decision-making process concerning the implementation of the VMI both upstream and downstream in the supply network. Originality/value – Most authors tend to consider VMI at the dyadic level, namely as an approach for managing materials and information flows between one or more customers and their immediate suppliers. Instead, this research adopts a supply network perspective, seeking to explain how VMI can be extended both upstream and downstream and considering the supply network as a whole rather than as a series of dyads.