But, of course, VMI isn’t right for every company, and these benefits don’t always materialize. There are many benefits of vendor-managed inventory, from reducing your company’s workload to potentially reducing carrying costs.
These “3PL” experts can be especially helpful if your VMI is subject to extreme fluctuations in demand. This extra collaborator can smooth over hiccups in the supply chain, creating a more optimized system for all parties involved. Some arrangements between businesses and vendors include an additional party: a third-party logistics provider. This could be a warehouse adjacent to a shipping center or a retail location like a clothing boutique. The VMI vendor is traditionally located offsite, in a location that’s convenient for the business. In other words, the seller outsources their company’s inventory management-including inventory counts, orders, audits, and sales-to a third party. Vendor-managed inventory (VMI) is a common supply chain arrangement where a supplier, manufacturer, or other qualified third-party controls the inventory and inventory-related decisions on behalf of the seller. Wondering whether vendor-managed inventory is a smart choice for your company? Read on for a complete definition of vendor-managed inventory, then review the many pros and cons of VMI. In inventory management, this offsite inventory is known as vendor-managed inventory, or VMI. Many companies opt to work with a third-party vendor to manage their inventory.
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