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Vendor-managed inventory (VMI) occurs when the supplier, rather than the retailer, manages the entire inventory process for a particular product or group of products.
What is Vendor Managed Inventory?
Vendor-managed inventory (VMI) is an inventory management technique where a product's supplier, often the manufacturer, is in charge of making the most of the inventory that a distributor has on hand. Under traditional inventory management, a retailer (also known as a buyer) decides on the order size on their own, but in VMI, the retailer shares their inventory data with a vendor (also known as a supplier), who then decides on the order size for both parties.
Examples of vendor controlled inventory
An illustration of vendor-managed inventories, Vendor managed inventory (VMI) includes, for instance: Vendor not at the customer site, vendor has inventory at the customer site and periodically reviews (either remotely or physically) the inventory on hand and restocks the inventory when the vendor deems it necessary. A form of consigned inventory.
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