Vendor managed inventory performance in Malaysian manufacturing companies

The implementation of the Vendor Managed Inventory (VMI) in the Malaysian manufacturing sector can be viewed as a solution to mitigate the increment of operational costs and low performance in customer services. Many factors contributed to the performance of the VMI programme, but only a few attempts were made to
determine the contribution of the VMI elements and the organizational factors on VMI performance; and the influence of the types of products in this relationship. The objectives of this study were to determine the relationship and to examine the impact of the VMI elements, the organizational factors on VMI performance, and the moderating effect of the types of products on the relationship between the VMI elements, the organizational factors and VMI performance. The study used the survey
method. Data were tested from 101 manufacturing companies listed in the Federation of Malaysian Manufacturers. The findings from the Pearson Correlation test showed that inventory location, managerial commitment, decentralized decision- making, information- system capability and trust have significant and positive relationships with cost performance. Meanwhile, inventory location, demand visibility, inventorycontrol limits, managerial commitment, information- system capability, and trust have significant and positive relationships with service performance. In addition, the multiple regression analysis showed that demand visibility, inventory- control limits, inventory location, trust, and managerial commitment contribute to VMI performance. The hierarchical regression analyses revealed that the types of products have a significant moderating effect to warrant desirable performance from demand visibility, inventory location, inventory control limits, and inventory- ownership. Therefore, the implementation of VMI in the Malaysian manufacturing sector needs to share demand information, apply minimum and maximum limits for inventory control, locate storage locations near customer premises, establish trust, and provide sufficient managerial commitment to benefit from the VMI programme. This study
also suggests that the application of inventory- control limits on innovative products
would decrease the cost performance of VMI. Also, inventory- ownership by the supplier on functional products would decrease the service performance of VMI