Vendor-managed Inventory forecast optimization and integration

Abstract

In the retail industry, consumer package goods (CPG) manufacturers have been working with retailers to use Vendor-managed Inventory (VMI) to improve the overall supply chain inventory turns and finished product velocity. This thesis explores those opportunities where a consumer packaged goods company can benefit from using VMI information to improve forecasting. First, this thesis discusses a novel way to compare those forecasts at downstream and upstream demand planning levels. Forecast errors are calculated in relation to the forecast data aggregation levels. Second, a causal model is used to analyze the contributing factors of high demand planning forecast. Finally, recommendations are provided on how to use VMI information and thus incorporate VMI forecasts into the upstream supply chain planning process.