Vendor Management Inventory

Vendor Managed Inventory is a family of business models in which the buyer of a product provides certain 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 consumption location (usually a store). A third party logistics provider is involved who makes sure that the buyer has the required level of inventory by adjusting the demand and supply gaps.
VMI reduces stock-ours and reduces inventory in the supply chain. Some features of VMI include:

1. Shortening of the supply chain;
2. Centralized forecasting;
3. No manufacturer promotions;
4. Trucks are filled in a prioritized order. For example, items that are expected to stock out have top priority, then items that are furthest below targeted stock levels, then advance shipments of promotional items (promotions allowed only in transition phase), and finally, items that are least above targeted stock levels;
5. Relationship with downstream distribution channels;

Results: inventory reduction and stock-out reduction.

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