Vendor Managed Inventory (VMI)
Definition
Vendor Managed Inventory (VMI) is an arrangement where the supplier itself monitors a customer's stock and automatically replenishes it when needed, instead of waiting for the customer to place an order. The supplier gets visibility into the customer's inventory data in return.
The supplier orders, not the customer
With VMI, the supplier sees in real time how much stock the customer has left. As soon as it drops below an agreed level, the supplier initiates a delivery themselves.
A benefit for both sides
The customer never runs short and doesn't have to track when to reorder. The supplier gets more predictable orders and a stronger customer relationship.
Practical example
A packaging supplier gets access to a customer's stock level. As soon as it drops below the agreed threshold, the supplier automatically schedules a delivery.
Related terms
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