POS and pricing data housed in the retailer’s system is used to calculate the invoice amounts. The scanning process at the Point-of-sale (POS) triggers a self-invoice generation process by the retailer. In a Scan-Based-Trading model, the supplier retains ownership of the inventory until the consumer purchases the product. Scan-Based-Trading is a form of VMI that has been adopted in selected merchandise categories of the grocery and automotive aftermarket sectors. Grocery Retailing – Another form of self-billing model is called Scan-Based-Trading. Much like the automotive example, the quantity of parts or raw materials consumed in a manufacturing line is calculated then multiplied by unit prices to self-generate an invoice. However, in each of the models the vendor is responsible for determining replenishment quantities and owning the inventory until a point of consumption. Numerous permutations exist including schedule assignment, supplier managed inventory and consignment. Kanban Card (Image Source: )Ĭonsumer Products – Manufacturers of consumer packaged goods and food products also employ VMI programs with their upstream suppliers of packaging, ingredients or raw materials. The consumption quantities are multiplied by unit prices to arrive at line item totals on a buyer-generated invoice. The quantity of parts or raw materials consumed in a manufacturing line is calculated at a regular interval. Regardless of the VMI model used, the self-billing process is similar. The Japanese OEMs use a system called “kanban.” European OEMs use a variety of models such as call-off, min/max and just-in-sequence. Automotive vehicle manufacturers also use VMI models with parts and subsystem suppliers. The process, referred to as “self-billing” or “evaluated receipts settlement.” The following four industries provide examples of how self-billing is being used in practice today:Īutomotive Manufacturing – Self-billing is often used in conjunction with Vendor Managed Inventory (VMI) programs in both North America and Europe. Instead, the buyer should self-generate the invoice based upon their view of the amounts due. In a post earlier this week I outlined the reasons why suppliers should stop invoicing their customers in many circumstances.
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