What does vendor-managed inventory (VMI) involve?

Vendor-managed inventory (VMI) is a supply chain management practice where the supplier or vendor is responsible for managing the inventory levels of their products at the customer's location. In this model, the supplier takes the initiative to monitor the inventory levels, often using real-time data, and makes decisions about when and how much stock to replenish. This arrangement can lead to improved inventory turnover, reduced stockouts, and the optimization of resources as suppliers have better visibility into demand patterns.

The key aspect of VMI is that it shifts the responsibility of inventory management from the customer to the supplier, allowing for a more collaborative relationship. By enabling the supplier to manage inventory, it can lead to lower overall inventory costs for both parties and improve service levels. In contrast, other choices suggest scenarios where the customer or other intermediaries manage inventory, which is not the essence of vendor-managed inventory.