Vendor-Managed Inventory

Vendor-Managed Inventory (VMI) is a supply chain arrangement in which the supplier (vendor) has visibility into the customer's inventory levels and assumes responsibility for replenishing inventory to pre-agreed levels. Rather than customers placing orders based on internal forecasts, the supplier monitors actual consumption and triggers replenishment shipments automatically. VMI reduces administrative burden, minimizes stock-outs, improves cash flow (by reducing inventory in the supply chain), and fosters collaboration between supplier and customer.