What is the VMI Model

Vendor Managed Inventory (VMI) is a proven methodology that streamlines inventory management and order fulfillment, improving collaboration between vendors and their distribution partners by aligning business objectives and optimizing operations for all participants.

The rise of omnichannel retailing has elevated buyers' expectations of when and how they receive their goods. This shift makes it difficult for supply chains that don't have visibility into their inventory management to meet today's demands. To deliver a competitive purchasing experience, supply chain partners need to collaborate in new ways. That means more connections, more support, and more preparation for what comes next - using Vendor Managed Inventory (VMI).

When supply chain partners start using VMI, they agree on the following goals:

Inventory turns

Fill rates and percent of inventory

Transaction costs

The VMI platform monitors actual activity and measures against these goals. Data is readily available to all parties upon request. The system also alerts parties when measurements are outside of acceptable ranges or when data anomalies are detected (e.g., missing/incomplete data).

How does VMI work?

Organizations receive data (called a product activity report) from their distribution partners. This report contains data on sales, product transfers, and inventory status (current, on order, in transit).

The VMI platform reviews the data and sends recommended replenishment orders based on key factors and agreed upon targets.

Suppliers review and approve recommendations

The VMI platform sends POs to suppliers and PO confirmations to distribution partners.

Once the partner approves the PO, the order is ready to ship