Vendor Managed Inventory (VMI) is a term describing the practice where the scheduling of replenishment of inventories at a acquiring party (Buyer) are performed by the supplying party (Seller).
In a pure VMI implementation:
- The Buyer owns the materials
- The Seller is responsible for the inventory levels at the Buyer
- The Seller schedules replenishment deliveries
- The Buyer is responsible for the physical goods
Many VMI implementations are not pure VMI, but are a mix with one or more other practices: Consigned Inventory (owned by Seller), Outsourced Warehousing (facility operated by a third party), Supplier Financing (payment terms and risks transferred to a third party). Each of these practices can operate standalone or in combination with others.
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