Vendor Managed Inventory is the process where the supplier generates orders based on mutually agreed objectives and demand information sent by the 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 a result of:
Improved Inventory Turns
Improved Service
Increased Sales
History of VMI
In it’s most basic form, VMI began life with the advent of retailers. Alongside the first retailers, the first suppliers were also introduced and these suppliers would periodically need to manually check on the stock levels of their 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, which 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.