Stock management is the function of understanding the stock mix of a company and the different demands on that stock. The demands are influenced by external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. VMI helps organisations manage their stock by placing the responsibility of stock replenishment on the supplier. 

Stock management involves overseeing the movement of goods in and out of a business. It encompasses ordering, storing, tracking, and controlling inventory levels to ensure optimal availability while minimising excess or shortages. Effective stock management aims to balance meeting customer demand and controlling costs associated with holding inventory. This includes activities such as forecasting demand, setting reorder points, efficiently managing storage space, and implementing inventory control measures to prevent loss or shrinkage. Overall, stock management plays a crucial role in supporting smooth operations and fulfilling customer orders across various industries, including retail, manufacturing, distribution, and logistics. 

TrueCommerce Datalliance receives data from a distributor, retailer or end user called a Product Activity Report. The report contains information such as sales, product transfers, and inventory position (on hand, on order, in transit).  

1. TrueCommerce Datalliance’s VMI platform reviews the data and sends a recommended replenishment order.
2. The supplier reviews the recommendations.
3. The supplier then creates a purchase order and sends to a customer (distributor, retailer, end user).
4. Once the customer approves the purchase order, the order is shipped.  

In a Vendor Managed Inventory, the supplier receives usage data from the client and uses this information to automatically generate replenishment orders. The supplier ensures that the agreed-upon inventory levels are maintained by considering factors such as lead times, demand forecasting, and seasonal fluctuations. This approach enables more proactive inventory management, reduces the administrative burden on the client, and allows the supplier to better forecast and plan their production. 

Consider a VMI relationship between a large retail chain and a beverage supplier. The retail chain shares real-time sales and inventory data with the supplier. Based on this data, the supplier can automatically generate orders to replenish stock, ensuring that the store shelves are always stocked with popular beverages. The supplier takes into account the lead time required to produce and deliver the beverages, historical sales data to predict future demand, and seasonal trends (e.g., increased demand for cold drinks in the summer). This proactive approach minimises stockouts and excess inventory, benefits the retailer by reducing the need for manual ordering and inventory management, and helps the supplier optimise their production and distribution schedules. 

Decreased Inventory Costs 

Clients can minimise their inventory holdings, leading to reduced storage and handling expenses.

Enhanced Stock Availability 

By actively managing inventories, vendors decrease the likelihood of stockouts, thereby improving service levels.

Strengthened Supplier Relationships 

VMI encourages a collaborative partnership between the client and supplier, fostering better communication and mutual advantages.

Dependency on Suppliers 

Clients rely on vendors for inventory management, which can pose challenges if the vendor's objectives are not fully aligned with the client's. 

Integration and Transparency 

Effective VMI necessitates seamless communication and transparent data sharing systems between the client and vendor.