Vendor Managed Inventory is the process where the supplier manages inventory levels for their trading partners, generating orders based on mutually agreed objectives and demand information sent by their customer.
Vendor Managed Inventory (VMI) is a streamlined approach to inventory management and order fulfillment. VMI involves collaboration between suppliers and their customers (e.g., distributor or retailer) which changes the traditional ordering process.
The goal of VMI is to align business objectives and streamline supply chain operations for both suppliers and their customers. The operational benefits that can be leveraged by those companies operating a VMI software solution are:
Improved Inventory Turns
Improved Service
Increased Sales
History of VMI
In it’s most basic form, VMI began life when retailers began looking for help from their suppliers to manage inventory levels. Initially, it was a manual process where suppliers would manage products within the retailers by sending a representative with a notebook and pen to record stock levels. These manually recorded stock levels would then be returned to the supplier where they would arrange with the store to deliver more stock if required.
Fundamentally this is the basis of VMI today, however, technology now replaces the manual processes and automated forecasting takes the place of people making decisions.