Vendor-managed inventory (VMI) is a new technique that has been popular for
inventory management of retail supply chain. It is one of the most widely
accepted partnering initiatives for improving multi-firm supply chain
efficiency, also known as continuous replenishment or supplier-managed
inventory. VMI partnership enables the suppliers to make vital decisions
regarding inventory replenishment for retailers. Actually this VMI transfers the
responsibility of inventory management from the retailers to the suppliers who
may be obliged to meet a specific customer service goal. Implementation of
VMI program offers a competitive advantage for retailers in terms of higher
product availability and provides the supplier with opportunities to progress
production and marketing efficiencies. Going into VMI contract may give the
involved firms some benefits. But entering into a VMI can be challenging
unless clear collaboration and communication between the manufacturer and
supplier is established to ensure success. To be successful in VMI contract, it is
necessary to ensure effective teamwork with strong participation by both
manufactures and retailers. So before adopting VMI strategy in their supply
chain, retailers should critically analyze its applicability.
