Value Creation in Electronic Supply Chains by Adoption of a Vendor Managed Inventory System

Many strategies have been developed to manage supply chain operations effectively. Vendor Managed Inventory (VMI) system is one of the prevalent strategic tools of the supply side logistics based on the electronic data exchange and business process automation among the suppliers and customers to enhance the competitive advantage. VMI is widely used in different industries including automotive sector. The VMI concept is a continuous replenishment program where suppliers are given access to demand and inventory level of customers and they are fully responsible for managing and replenishing the customer’s stock. VMI’s extension on customer satisfaction cannot be perceived sufficiently by decision-makers who are responsible to develop and invest in the customer-supplier relationship. This paper presents a path model using the method of Partial Least Squares (PLS) regression to give insight to decision-makers to understand effect of the VMI adoption on customer satisfaction. This paper investigates both determinants of relative factors of successful VMI adoption and the relationship in the supply chain with an empirical automotive industry case. The results show that the collaboration and coordination between customer and supplier and infrastructure of the information-sharing are the important dimensions to add value to the supply chain and to enhance customer satisfaction.