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Replenishment Scenario 4 - Forecast-based Supplier-Managed Inventory (SMI), Version 1.0 
Status:  Provisional Ratification by Committee November 2000.
Recast of Pre-2000 Version C Order Models (Balloted and Ratified by Membership, November 1996) and Version A Forecast Models and (Balloted and Ratified by Membership, August 1997)

Business Overview

Special Notes:

Buyer sends consumption plan containing gross requirements (planned consumption), inventory levels, and min/max inventory targets. Receipt data sent by buyer so seller can calculate in-transit quantities (embedded Receipt Advice). Seller nets forecast data to determine replenishment requirements based on buyer's inventory levels and min/max targets. Seller may send replenishment plan to buyer, which conveys planned shipments so buyer can evaluate the plan. Buyer may use plan for other purpose, such as anticipating Receiving workload.

See also Assumptions in the supporting documentation.


Overview (Use Case) Diagram    Narration

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Narration   Overview (Use Case) Diagram

Step Description
1. Pre-Order Model 2:  The buyer and seller negotiate the terms for the supplier-managed process and the related Blanket Purchase Orders.  The pre-order process includes the establishment of pricing and a Terms and Conditions Agreement.
2. Buyer issues Blanket Purchase Order (BPO) to seller per Order Model 2 component of Replenishment Scenario 6.
3. Seller receives Consumption Plan sent by buyer. Includes determining if data sent is in valid format and meets any syntax requirements. Seller nets forecast data to determine if changes from a previous plan are within acceptable tolerance for change, to determine whether replenishment is required during the current planning cycle, and to generate a plan for future replenishment.  The Consumption Plan may include report on inventory consumption or resale activities that have occurred since the previous schedule was sent.
4. If supplier determines that replenishment is required during the current planning cycle, the seller generates a release against the buyer's BPO per Order Model 3B.
5. Seller ships goods to the buyer per the appropriate Shipment Scenario

The Shipment Scenario here is embedded within Order Model 3B.  This is because the Shipment Notification document is serving a dual purpose in Supplier-Managed Inventory, acting both as Ship Notice/Manifest and as a "reverse release" informing the buyer that a release has been made against its BPO.

 If a third-party warehouse is used, see Consignment Scenario 4 - Third-party Warehouse, Buyer-Contracted or Consignment Scenario 5 - Third-party Warehouse, Seller-Contracted.

6.

(Optional) The buyer may report inventory consumption or resale activities that have occurred so that the supplier can monitor the activity.  This activity may be included in the consumption schedule (Step 3), or separately if this activity needs to be reported more frequently than the consumption schedule in order for the supplier to keep inventory continually replenished in between iterations of the consumption schedule.

There is more than one choice here because reporting a usage events very often means using business message that is already being exchanged, and may or may not require the addition of a data element or two.

  1. If the buyer is already sending an inventory report to the seller (Inventory Management Model 1), that may be used to report consumption or resale of inventory.
  2. If the seller needs consumption of inventory reported separately from or more frequently than the consumption schedule or a standard inventory report, a report containing only consumption events may be used (Inventory Management Model 4).
  3. If the buyer is already sending a point-of-sales report to the seller, that may be used to report consumption events (most commonly used event is resale of goods).  The Sales Reporting Scenario used depends on how many tiers of supply chain partners are involved in the reporting.
    1. If the buyer is required to report details about end-customers, use Inventory Management Model 2.
    2. If the buyer is not reporting details about end-customers, such as in retail sales of fast-moving consumer goods, use Inventory Management Model 3.

Inventory Management Model 4:  Buyer reports usage to trigger transfer of ownership and Billing/Payment cycle.  Usage is in-house consumption. Reporting of usage does not automatically trigger replenishment in most Consignment Scenarios.  Instead, replenishment is per the next release or order - Step 2 above.  Alternatively, the buyer may use the inventory report in step 4 to report billable consumption of inventory.

Sales Reporting Scenario

  • Inventory Management Model 2 - Inventory is physically located at buyer’s facility. Buyer reports resale or transfer to trigger transfer of ownership and Billing/Payment cycle. Buyer may report detail (names/locations) of sold-to/ship-to, and/or ship-from parties. Reporting of usage does not trigger replenishment (replenishment is per next release or order - Step 2 above).
  • Inventory Management Model 3 - Inventory is physically located at buyer’s facility. Buyer reports usage (in-house consumption or transfer/resale) to trigger transfer of ownership and Billing/Payment cycle.   The buyer does not report details about end customers, but may report details about inventory activity.   Reporting of usage does not trigger replenishment (replenishment is per next release or order - Step 2 above).
6. Inventory Management Model 1:  (Optional) Inventory is physically located at buyer’s facility.  Buyer performs inventory counts and reports to seller (scheduled, as-needed, or at seller request).  Seller may invoice for inventory shrinkage.

The buyer may also use the Inventory Report to report billable consumption of inventory.  In that case, Step 3 above may not be required, but at least one of Step 3 or Step 6 is required.

7. (Optional) The buyer reports may report inventory adjustments, if applicable.  See Inventory Management Model 10 or adjustments may be included in Inventory Reporting per Inventory Management Model 1 (Step 6).
8. Financial Scenario Ownership transfers from seller to buyer per contractual terms.  Seller invoices buyer or payment is triggered per appropriate Financial Model.  Seller may also bill for inventory shrinkage per contractual terms.

Last updated 01 February 2003