Vendor-managed inventory (VMI) - definition, meaning

Vendor-managed inventory (VMI) – what is it?

Vendor-managed inventory (VMI) is a strategy in which the supplier is responsible for maintaining adequate inventory levels at the customer. In this model, the supplier monitors inventory in real time and makes ordering decisions based on this, with the goal of ensuring that the customer always has the right amount of products to meet its needs.

The goal of VMI is to optimize inventory and reduce costs associated with warehousing and inventory management. With this strategy, companies can avoid problems with excess or shortage of goods, which in turn allows for increased operational efficiency and improved supplier-customer relations. A key aspect of VMI is the cooperation and exchange of information between the parties, which enables better demand forecasting and order planning.

VMI benefits not only suppliers, who can better manage their resources, but also customers, who can reduce their operating costs and focus on other aspects of the business. As technology continues to evolve, many companies are using advanced IT systems to monitor inventory and manage VMI processes, further enhancing the effectiveness of this strategy.