An Appraisal of Vendor Managed Inventory Strategy in Mining Operations, the Case of Gold Fields Ghana Ltd.

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Gold Fields Limited is one of the world’s largest un-hedged producers of gold, providing investors with maximum leverage to the gold price. In order to achieve it mission of “achieving outstanding returns for investors “Gold Fields must improve the current business processes by establishing long term relationships with their major suppliers. Today, GGL faces a high level of inventory, which has resulted substantial amount of tied up capital and inefficient processes. Therefore, this study will evaluate the effects that a vendor managed inventory (VMI) partnership has had on GGL’s and two chosen suppliers. VMI is a concept within supply chain management, where the supplier is fully responsible for managing the customer’s inventory level. To achieve this, the supplier is given access 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 embraced the concept with success, others have retreated forcefully. This study has conducted a broad literature review regarding VMI and performance measurements, as well as, organisational structures and information sharing in collaborative partnerships. In addition to the thorough study of GGL’s processes, field visits were made at the suppliers’ to visualize their material and information flow in order to examine what areas VM have had an impact. The conclusion of this study is that a VMI strategy, in supplement with a consignment stock policy, is very effective for GGL. Further, the study indicates that there are mutual benefits from a VMI implementation for both the customer and the supplier. Specifically, a higher service level from the suppliers has been attained by GGL, while the suppliers have also obtained improvements within the areas of inventory and order processing. However, there is still more room for improvement. It is advised that for efficient operations and maximization of benefits of VMI to all the actors; the following principles should be adhered to: • Communicate expectations of all parties. • Precise information must be shared • Reliable transmission, receipt, and use of information must be ensured • Expect implementation to be a process not a project • Plan to spend sufficient time and money to make it work.
A thesis submitted to the School of Business, Kwame Nkrumah University of Science and Technology, Kumasi —Ghana in partial fulfillment of the requirement for the Degree of Master of Business Administration, 2008