Digital Transformation: Smart Supply Chains with Vendor Managed Inventory (VMI) - A Case Study for a medium sized Swedish healthcare company in VMI implementation

Abstract

Background & Purpose: Supply chain management (SCM) has become a hot topic in the current global competitive markets that drives many companies to explore, especially in inventory management. Vendor Managed Inventory (VMI) as an SCM method enables all participants in the supply chain to achieve rapid development and obtained huge benefits. Under the VMI model, manufacturers/distributors give the inventory management responsibility to the suppliers to increase the inventory efficiency. One Swedish healthcare company desire to increase the supply chain resilience and save supply chain cost, especially during the Covid-19 pandemic and would like to implement the VMI model with its supplier. The two research questions in this thesis are 1) How can a healthcare company in Sweden implement the VMI model with its vendor? and, 2) What risks are associated with implementing VMI with a vendor for a healthcare company in Sweden? Method: This thesis is a qualitative study focus on one single Swedish healthcare company. There are ten interviews conducted within the Swedish healthcare company and its vendor. The research strategy is to obtain data from literature reviews and interviews based on the two research questions and then compare the similarities and differences for analysis. Results: The implementation process of VMI has summarized in two steps. The first step is VMI preparation, which includes Choose Product Assortment, Supplier Selection, IT Foundation, VMI Project Team, Risk Analysis. The Second step is VMI implementation, which includes Sign VMI Contract, VMI Training and VMI Process Set Up. Based on theoretical and empirical data, the author developed a conceptional risk management model for VMI. Through analysis, the author identified 13 risk factors in five dimensions. In addition, a new dimension, Change Management, is added to the existing supply chain risk management model from Tang (2006). In this new conceptional model, the risk factors are supplier relationship, inventory control, lack of resources, supply network design, contract, which belongs to Supply Management. Product diversification, substitution bundling, and standardization belong to Product Management. IT system support belongs to Information Management. Lack of resources, keep frequent and large orders, more responsibility from marketing belong to Demand Management. Moreover, fear to change, long lead time for employees to learn a new system, and lack of knowledge about VMI belong to Change Management.