What does 'vendor-managed inventory' (VMI) refer to?

Vendor-managed inventory (VMI) is a collaborative inventory management approach where suppliers take on the responsibility for managing their products in a retailer's inventory. This means that the vendor monitors inventory levels and determines when to restock their goods based on predefined agreements and performance metrics. The aim of VMI is to streamline the supply chain, reduce inventory costs, and ensure that the retailer has the right amount of stock available to meet customer demand without overstocking.

In this system, the vendor has access to inventory data and can make informed decisions based on sales trends and current stock levels. This proactive approach helps to minimize stockouts and excess inventory, creating a more efficient inventory management process. The need for close collaboration between the retailer and supplier is essential in VMI, as it fosters better communication and planning.

The other options depict scenarios that do not represent the principles of VMI. Retailers handling all aspects of inventory management is characteristic of traditional inventory control rather than VMI. Managing inventory exclusively during peak times does not reflect the ongoing nature of VMI practices, which are meant to optimize inventory levels continuously. Lastly, stating that inventory management software is exclusively used for tracking overlooks the collaborative aspect inherent to VMI, where the vendor actively participates in managing the inventory.