Effectiveness of vendor managed inventory systems in retail supermarkets in Kenya

Abstract

Every business exists to make profit. In the 21st century, these profits are realized in a myriad of ways including cost savings, improvement of working capital and reduction of risk. This paper sought to find out the contribution of adoption of Vendor Managed Inventories, also known as Consignment Stock Management, as a strategy that shrewd business executives in the retail supermarket chains could use to gain competitive advantage by leveraging on inventory supplier reliability, lower administrative costs, and strong buyer/supplier relationships to grow revenues and reduce risk. Data from procurement managers in 24 retail supermarkets with a branch network of more than three in Nairobi was analyzed. The findings suggest that VMI has been effective in retail supermarkets by improving stock management, cash flows and risk management. VMI seeks to accomplish a deeper integration and collaboration between the members of the supply chains in order to cope with the ever decreasing time window for product and service fulfillment and the requirements for the improvement of operational efficiency.

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