What is vendor-managed inventory?

Vendor-managed inventory (VMI) is a supply chain practice where the responsibility for maintaining inventory levels is shifted from the retailer or buyer to the supplier. In this system, suppliers monitor inventory levels at their customers' locations and are responsible for replenishing stock as necessary. This approach helps ensure that inventory levels are optimized and can reduce the risk of stockouts or excess inventory.

By allowing the supplier to manage inventory, companies can improve their supply chain efficiency and responsiveness. This method often leads to better collaboration between suppliers and retailers, as it relies on real-time data sharing and communication. Suppliers can leverage their expertise in forecasting demand and managing production to better align stock levels with actual market conditions.

The other options do not capture the essence of VMI accurately. Some suggest a reduction in relationships or an increase in lead times, which runs contrary to the goals of vendor-managed inventory. Rather, VMI strives to strengthen supply chain partnerships and streamline inventory management.