NBICO replaced essentially all of its legacy systems with SAP R/3 in the late 1990s with a “Big Bang” implementation at all North American sites. With a full suite (except HR) of ERP modules successfully implemented, NIBCO became a recognized leader within its industry. Since not all students may have read the other case study, this case study begins with a short introduction to the company (including a fuller account of the company’s customer base) and a brief summary of its subsequent ERP projects as well as major supply chain improvements since the initial implementation. The remainder of the case focuses on its VMI initiatives with large wholesalers. NIBCO works with interested customers to develop a fully automated replenishment process using mySAP modules. An analysis of the customer’s past purchasing activity and relevant marketplace forecasts are utilized by NIBCO to develop a proposal for a given customer’s reorder levels under a sole-sourcing assumption for NIBCO’s products (a requirement for a VMI arrangement with NIBCO). If accepted, a NIBCO VMI team works with relevant business and IT personnel in the customer organization to implement an EDI capability and develop the metrics that will be tracked for assessing the program’s success for that customer. 

The benefits to NIBCO from all of it supply chain investments are detailed in the final pages of the case. The case then ends with questions about how NIBCO can continue to leverage its IT capabilities. Additional writeups by the authors of this case study can be used by the instructor to amplify several of the points in this short case: a) As of this writing, a detailed case study of NIBCO’s mySAP initiatives can be found on the SAP Web site, along with case studies written by other authors about companies in different industries. b) Chapter 8 by the case study authors entitled “ERP as a Platform for Vendor Managed Inventory,” published in Strategic ERP: Extension and Use, edited by E. Bendoly and F. R. Jacobs (Stanford University Press, 2005) contains further descriptions of this project. Case Study II-1—Vendor Managed Inventory at NIBCO

Questions to be answered:

1. What was the catalyst for NIBCO to develop a VMI program, and why was it able to respond? 

2. Describe what types of transactions are involved in NIBCO’s VMI program. 

3. What types of benefits have been attributed to the VMI initiative—for both NIBCO and NIBCO’s customers? 

4. What new initiatives would you recommend that NIBCO pursue next to continue to take advantage of its current IT capabilities?