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Vendor Managed Inventory (VMI) is a business strategy where the responsibility for inventory management is transferred from the buyer to the vendor. In VMI, the vendor monitors and controls the inventory levels at the buyer’s location, ensuring that stock is replenished in a timely manner.

This arrangement is often facilitated through shared data and communication systems.

VMI aims to optimize inventory levels, minimize stockouts, and reduce costs by improving supply chain efficiency. The vendor uses real-time sales data and demand forecasts to proactively manage inventory, ensuring that the buyer has the right amount of stock at the right time. VMI can lead to improved customer service, reduced inventory holding costs, and streamlined order fulfillment processes.