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Sourcing & Suppliers

Vendor Managed Inventory (VMI)

Also known as: VMI

Vendor managed inventory (VMI) is an arrangement where the supplier monitors and replenishes a buyer's stock of an item, rather than the buyer raising orders.

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Under VMI, the supplier takes responsibility for keeping agreed items in stock at the buyer's location, using shared consumption or stock-level data to trigger replenishment. It shifts the day-to-day ordering burden to the supplier and can reduce both stock-outs and excess inventory.

VMI works best for high-volume, predictable consumables where continuous availability matters — pantry, packaging or MRO items, for example. It depends on trust and good data sharing, and is usually governed by a framework agreement that sets minimum and maximum stock levels.

Frequently asked questions

What is vendor managed inventory?
VMI is an arrangement where the supplier monitors the buyer's stock levels and replenishes agreed items automatically, instead of the buyer raising each order.
What are the benefits of VMI?
Fewer stock-outs, less excess inventory, reduced ordering admin for the buyer, and closer collaboration with the supplier on demand.

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