Vendor Managed Inventory (VMI)

A family of business models in which the buyer of a product provides certain information to a vendor (supplier) of that product and the vendor takes full responsibility for maintaining an agreed inventory of the material.

What is Vendor Managed Inventory (VMI)?

Vendor Managed Inventory (VMI) is a supply chain strategy where the supplier manages the inventory levels at the customer's location. This means that the supplier takes on the responsibility of monitoring stock levels, replenishing products, and managing the flow of goods to ensure that the customer always has the right amount of inventory on hand. By implementing VMI, companies can improve efficiency, reduce stockouts, and lower holding costs. This collaborative approach between the supplier and customer allows for better visibility into inventory levels, demand forecasts, and order management. VMI helps to streamline the replenishment process, leading to smoother operations and increased customer satisfaction. This proactive inventory management strategy promotes closer relationships between suppliers and customers, resulting in better communication, higher service levels, and ultimately, a more optimized supply chain.