Vendor Management Inventory is also called inventory management, vendor managed inventory, inventory control and inventory control management. The core objective of Vendor Management Inventory is to maintain an optimal inventory level that will meet customer demands.
Large retail outfits and manufacturers are determined to be more responsive to customer demand, but conversely do not wish to hold a larger or wider range of inventory than is necessary. Many companies, particularly household name retailers, use demand driven procurement systems to manage their inventories and stock replenishes.
Vendor Managed Inventory (VMI) systems are managed by vendors, who are interfaced to their supplier’s sales and inventory systems. In VMI, the vendor is responsible for sending stock as and when inventory levels reach a certain level.
There are a number of benefits associated with Vendor Management Inventory for the vendor and these include:
There is a considerable impact on the purchaser’s bottom line by using Just in Time (JIT) purchasing and there are a number of other benefits. These include:
Both the vendor and purchaser benefit from enhanced business communications and the ability to maintain optimum stock levels and delivery schedules. There are, however, some disadvantages to the Vendor Management Inventory process and these include:
A considerable number of major retailers and manufacturers use Vendor Management Inventory processes and systems and major consultancies offer these services and software packages so VMI is definitely a driving force in efficient and profitable procurement.
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