JIT Services LLC: Vendor Managed Inventory (VMI)

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An Introduction and definition of Vendor Managed Inventory

The steps involved in setting up your VMI program.

The numerous benefits for both manufacturer and distributor

Frequently asked questions about Vendor Managed Inventory

Vendor Managed Inventory: A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributors inventory levels. The manufacturer has access to the distributors inventory data and is responsible for generating purchase orders.

To further define it, lets look at 2 business models:

Under the typical business model
When a distributor needs product, they place an order against a manufacturer. The distributor is in total control of the timing and size of the order being placed. The distributor maintains the inventory plan.
Vendor Managed Inventory model
The manufacturer receives electronic data (usually EDI or via the internet) that tells him the distributors sales and stock levels. The manufacturer can view every item that the distributor carriers as well as true point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order*, not the distributor.

*Note: VMI does not change the "ownership" of inventory. It remains as it did prior to VMI.

Consignment Inventory: When the supplier places inventory at a customers location and retains ownership of the inventory. Payment is not made until the item is actually sold.