The Impact of Factory Managed Inventory(FMI) on Global Supply Chains

This paper is concerned with the comparison of a factory managed inventory (FMI) supply chain to a traditional forecast-based orders supply chain. The particular emphasis of this paper is the impact the FMI structures have on the ´´Bullwhip Effect´´ generated within the supply chain. We especially focused on the relationship between the sales site and the factory site, and the developed FMI supply chain that the factory manages each sales site´s inventory level, the production site inventory level and actual customer demand as a unified integrated system. A comparison of the performance of the FMI system and conventional supply chain system of a global electronics parts company was investigated by present value (PV) analysis using the value of inventories as a variable. The results revealed that FMI greatly contributed to both reduction of the Bullwhip Effect and improvements of the cash flow PV Index.