PVMI: A New Approach to Supply Chain Control

Vendor Managed Inventory (VMI) solutions are focused on keeping inventory off the manufacturer’s books until it is needed to fulfill customer orders. DB Schenker takes a broader view as part of a standardized solution called Production Vendor Managed Inventory (PVMI)—which enables the OEM to gain comprehensive supply chain control, something much more powerful than just minimizing inventory ownership.

In a traditional manufacturing model, the manufacturer orders and purchases the materials needed for production from the brand owners’ (the Original Equipment Manufacturer or OEM) specified suppliers, and owns this inventory while it waits to be used for production. The material ownership and costs lie with the manufacturer prior to consumption.

A VMI model changes the point of material title transfer from the supplier to the manufacturer so that it happens only when materials are sent to the production line. The manufacturer pays for materials only as they are consumed rather than paying when they leave the supplier’s origin, significantly reducing the manufacturer’s inventory costs and associated liability.

While extremely beneficial, a VMI model can result in supply chain control issues surrounding inventory ownership, physical control, and visibility.

DB Schenker’s PVMI Solution

DB Schenker addresses these VMI model issues as part of its PVMI solution, which is designed specifically for inbound material in manufacturing supply chains. It provides a robust, state-of-the-art solution to OEMs and their manufacturing sites, while addressing suppliers’ concerns that limit their willingness to participate in traditional VMI solutions. PVMI includes standardized business processes and IT solutions with an underlying IT structure to support both. PVMI enables comprehensive inbound material management: inbound transportation, receipt, putaway, storage, pull, pack, shipment, dray transportation, material management, inventory control, liability, warehousing, customs, contracts, supplier on-boarding, supplier management, customer support, non-standard services, and B2B messaging.

PVMI enhances traditional VMI solutions in a number of areas:

Supply Chain Control: Traditional VMIs shift inventory ownership at the expense of OEM control. DB Schenker’s PVMI solution accomplishes this change in inventory ownership, but increases OEM control over the supply chain. PVMI includes standardized solutions that enable the OEM to leverage the inbound material supply chain, even in the typical outsourced manufacturing environment. It does this by including solutions that cover inbound material visibility, on-hand material visibility, physical control of inventory by a trusted third party, and VMI postponement to minimize inventory at the manufacturing site. Partnering with DB Schenker and implementing PVMI enables the OEM to operate a Control Tower to optimize supply chain operations.

Visibility and Collaboration: A critical first step to address the mismatch of actual inventory versus demand is a visibility solution. A key element of the PVMI solution is InView—a single, global, easily accessible and secure inventory visibility tool used by all parties involved in the supply chain. InView provides real-time visibility to all material, as well as all necessary details as to its exact status: when it was received, how long it has been on hand, exactly when it is pulled, historical pull (consumption data), etc.

This clear and consistent visibility allows all parties to understand material flow, and to collaborate on improved matching of supply to demand in real time, and, as a result, better meet the OEM’s customers’ orders. All parties rely on InView as the "source of truth" for determining available, known good, and ready-to-use inventory. The WebASN tool enhances PVMI’s InView visibility solution to include inbound material. This extends the starting point for visibility to departure from the supplier’s facility instead of receipt at the warehouse.

The DB Schenker InView and WebASN tools, combined with DB Schenker as a trusted third-party logistics provider, offers each OEM and supplier real-time visibility and physical inventory control in any DB Schenker PVMI warehouse globally. This combination enables and encourages collaboration between the OEM, the manufacturing sites, and the suppliers to align materials to where they can best be utilized.

Facilitating OEM and Supplier Engagement: The unique characteristics of many specialized manufacturing supply chains (a large number of OEM customers, a large number of suppliers, and a relatively small number of outsourced manufacturing sites) lead to a large degree of similarity between various OEM supply chains. PVMI takes the similarities DB Schenker has seen in its 14-plus years of working with OEMs, and uses them as the basis for a standardized solution specifically designed to meet the requirements of OEMs without extensive customization. This allows easier implementation by new OEM customers, as standardization has enabled a PVMI ecosystem to develop where suppliers and electronics manufacturers are already familiar with the solution.

PVMI also enables faster supplier engagement because suppliers only have to develop a single solution with DB Schenker that can be used for any manufacturer, manufacturer site, or OEM. More than 1,000 suppliers are already part of the PVMI eco-system.

DB Schenker’s dedicated PVMI Solutions team is available for immediate engagement. Contact [email protected] for more information.

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