Vendor Managed Inventory (VMI) is a supply chain practice where the inventory is managed by the supplier, rather than by the retailer. This business model is designed to increase efficiency in the supply chain by reducing stock-outs and improving inventory turnover.
In a VMI arrangement, the supplier has access to the retailer’s inventory data and is responsible for maintaining the inventory levels. The supplier decides when to replenish the stock and how much to supply based on predetermined minimum and maximum levels. This shifts the responsibility for inventory management from the retailer to the supplier.