Vendor Managed Inventory (VMI)

Vendor Managed Inventory (VMI) is a business model where the supplier assumes responsibility for maintaining an agreed inventory level at the customer's location. The vendor has access to the customer's inventory data and is responsible for generating purchase orders when stock reaches predetermined reorder points.

Benefits of VMI include:

• Reduced inventory costs for the buyer
• Lower risk of stockouts
• Decreased administrative burden
• Improved supplier planning and production scheduling
• Strengthened buyer-supplier relationships

Modern vendor management systems support VMI arrangements by providing secure data sharing between buyers and suppliers, automating replenishment signals, and tracking performance metrics to ensure service level agreements are met.