Vendor Managed Inventory
Vendor Managed Inventory is 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. During this process, the supplier is guided by specified objectives regarding inventory levels, fill rates, and transaction costs.
A typical business model without VMI entails that 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.
However, when utilizing the Vendor Managed Inventory model, the manufacturer receives electronic data, usually EDI(Electronic Data Interchange) or via the internet, that tells him the distributors sales and stock levels. The manufacturer can then view every item that the distributor carriers as well as true point of sale data. The manufacturer becomes responsible for creating and maintaining the inventory plan. Under VMI, the manufacturer generates the order, not the distributor. Note that VMI does not change the "ownership" of inventory. It remains as it did prior to VMI.
VMI consists of two EDI transactions that are the basis of the process:
? Product Activity Record; the data contained in this document are sales and inventory information. This is the primary transaction
? The second transaction contains and deals with the product numbers and the quantities ordered by the supplier as the customer requests
In all of its forms VMI should be about improving visibility of demand and product flow in ...