3 Understanding Outbound Inventory Agreements

This chapter contains the following topics:

3.1 JD Edwards EnterpriseOne Outbound Inventory Agreements Overview

Outbound Inventory agreements are established between suppliers and their customers to move and manage inventory between their locations. You enter into agreements with business partners to save money and time, provide better service to your customers, and save on capital expenses.

The purpose of the JD Edwards EnterpriseOne Outbound Inventory Agreement Management system is to record all transactions, monitor volume or amount balances, and determine whether you and your business partners are in compliance with the agreement terms. With JD Edwards EnterpriseOne Outbound Inventory Management, you can establish agreements easily, enter orders against them immediately, and maintain volume or amount monitoring.

The JD Edwards EnterpriseOne Outbound Inventory Management system allows you to establish agreements with:

  • Effective dates

  • Agreement location

  • Items

  • Stocking levels

  • Replenishment methods

3.2 Types of Outbound Inventory Agreements

Several companies use actual written legal documents that include all the terms and stipulations for each agreement. Different kinds of agreements are used in the inventory purchasing and sales cycles.

With the JD Edwards EnterpriseOne Outbound Inventory Management system, you can create, process, and readily monitor the following types of agreements:

  • Consigned inventory agreements

  • Customer owned vendor managed inventory (VMI) agreements

3.2.1 Consigned Inventory Agreements

Consigned inventory agreements exist between a supplier and their customer where the supplier agrees to supply a specific volume of inventory to the customer, based upon the expected demand. The customer does not pay for the inventory upon delivery, but only when the inventory is consumed (at the agreed-upon price).

When you establish a consigned inventory agreement with your customer, either you or your customer can assume the responsibilities of reporting consumption and creating replenishment suggestions. You can also collaborate with your customer to report consumption or create replenishment suggestions.

3.2.2 Customer Owned Vendor Managed Inventory (VMI) Agreements

Customer owned VMI agreements exist between a supplier and their customer where instead of the customer monitoring its sales and inventory for the purpose of triggering replenishment orders, the vendor assumes responsibility for these activities.

After a VMI agreement is established, a customer effectively outsources their inventory management function to their supplier. The supplier assumes responsibility to maintain a required inventory level at the customer's location.

Note:

When you establish a customer owned VMI agreement with your customer, the customer owns the inventory.

3.2.3 Internally Owned Vendor Managed Inventory (VMI) Agreements

You can create internally owned VMI agreements between supplier and customer where the supplier owns and manages the inventory at the customer's location.

An internally owned VMI agreement has the same properties as a consigned inventory agreement. You use the same process to work with internally owned VMI agreements as consigned inventory agreements. The order entry process involving internally owned VMI agreements and internally owned shipment orders is also similar.

3.2.4 Outbound Inventory Item Groups Agreements

You can create consigned and vendor managed inventory agreements for outbound inventory item groups. You create outbound inventory item groups to manage items with the same characteristics through one agreement.