What is Vendor Managed Inventory (VMI)?

Vendor Managed Inventory (VMI) is a supply chain management practice where the supplier or vendor is responsible for managing the inventory levels of their products at a customer’s location. In VMI, the supplier monitors inventory levels, replenishes stock as needed, and assumes ownership of the inventory until it’s consumed or sold by the customer. This approach allows for tighter integration between supplier and customers, streamlines inventory management processes, and reduces stockout and excess inventory.

Key benefits of vendor managed inventory

Optimized inventory

VMI ensures that inventory levels are aligned with actual demand, minimizing the risk of stockouts while reducing excess inventory carrying costs.

Improved efficiency

By giving suppliers autonomy to directly manage inventory levels, VMI streamlines order processing, reduces administrative tasks, and enhances supply chain efficiency.

Enhanced visibility

VMI provides greater visibility into inventory levels and demand patterns, enabling more accurate demand forecasting and better decision-making.

Stronger supplier-customer relationships

VMI fosters closer collaboration and communication between suppliers and customers, leading to better understanding of mutual needs, improved responsiveness, and increased trust.


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