Vendor-Managed Inventory (Vmi) Definition
In business, vendor-managed inventory (VMI) is a supply chain management practice in which the supplier of goods manages the inventory at the customer’s site. The customer provides the supplier with information about their desired level of stock, and the supplier then determines how much to ship and when to ship it. This arrangement can help to improve inventory management and reduce costs for both the customer and the supplier.
Vendor-managed inventory can be contrasted with traditional purchasing, in which the customer orders goods from the supplier as needed. In a VMI arrangement, the supplier takes on more responsibility for managing inventory levels, which can lead to improved communication and coordination between the two parties.
There are several benefits of vendor-managed inventory for customers. By delegating responsibility for inventory management to the supplier, customers can free up staff time and resources that can be devoted to other tasks. In addition, VMI can help to ensure that customers have the products they need on hand when they need them, which can improve customer satisfaction. Finally, VMI can help to reduce inventories and associated carrying costs.
There are also some potential drawbacks of vendor-managed inventory that customers should be aware of. First, VMI arrangements may give suppliers too much power over customers’ inventories, which could lead to problems if there is a disagreement about stock levels or other issues. Second, VMI can require significant investments in technology and data sharing infrastructure, which may not be feasible for all businesses.
