Vendor Managed Inventory and VMI Systems
Vendor Managed Inventory (VMI) describes a family of business models in which the buyer of a product provides information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's factory / warehouse.
VMI benefits both the manufacturer and the supplier as not only does it reduce stock shortages but it also reduces the amount of inventory held in the supply chain. The supplier's representatives in a stores benefit the vendor by ensuring their items are properly displayed and stores staff are familiar with the features of the product line etc. VMI benefits the supplier as they are given more detailed, accurate and timely forecast information as well as actual usage information that they would not otherwise have access to.
One of the keys to making VMI work is shared risk. Often if the inventory does not sell, the supplier will repurchase the product from the buyer, however, it is more common in manufacturing environments that the product remains in the possession of the manufacturer but is not owned by them until the items are consumed by production.
