AbstractKongsberg Automotive (KA), a first- and second-tier supplier to some of the largestautomotive manufactures, has acknowledged the need to enhance their competitivenessand to collaborate within the supply chain. In order to do this, KA must improve thecurrent business processes by establishing long term relationships with their suppliers.Today, KA face a high level of inventory, which has resulted substantial amount of tiedup capital and inefficient processes. Therefore, this study will evaluate KA’s and threechosen suppliers’ possibilities and the effects that a vendor managed inventory (VMI)partnership will imply.VMI is a concept within supply chain management, where the supplier is fully responsiblefor managing the customer’s inventory level. To achieve this, the supplier is givenaccess to sensitive information of the customer’s inventory level and demand and can,thereby, replenish the customer’s stock when needed. Although, some firms have embracedthe concept with success, others have retreated forcefully.To fulfil the purpose of this study, we have done a broad literature review regardingVMI and performance measurements, as well as, organisational structures and informationsharing in collaborative partnerships. Further, to better understand the implementationand effects of VMI, a benchmarking study was made at Volvo Powertrain inSkövde, an early VMI pioneer. In addition to the thorough study of KA’s processes,field visits were made at the suppliers’ to visualize their material and information flow inorder to examine in what areas VMI would have an impact.The conclusion of this study is that a VMI strategy, in supplement with a consignmentstock policy, is possible for KA. However, issues concerning responsibilities and ownershiphave become apparent throughout the study that needs to be agreed upon. Further,the study indicates that the benefits from a VMI implementation will be greater for KA,than for the suppliers. Specifically, a reduction in inventory value can be attained by KA,while the suppliers only can obtain minor improvements within the areas of inventory,production, and order processing. On the other hand, the suppliers will face drawbacks,mai...
