GlossaryEN1 min readUpdated: Jun 26, 2026

Vendor Managed Inventory (VMI)

Vendor Managed Inventory (VMI) is a supply chain arrangement in which the supplier takes over responsibility for monitoring and replenishing stock at the customer's premises.

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Last updated: 26 June 2026Published: 19 June 2025

Source: https://en.wikipedia.org/wiki/Vendor-managed_inventory

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Logistics Concept

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Definition & Explanation

Vendor Managed Inventory (VMI) is a supply chain arrangement in which the supplier takes over responsibility for monitoring and replenishing stock at the customer's premises. Using real-time inventory data exchanged via EDI or web portal, the supplier triggers replenishment autonomously whenever stock approaches an agreed minimum level, eliminating the need for the customer to raise individual purchase orders. The model is best suited to standardised goods with predictable demand: packaging materials, spare parts, and consumables are typical candidates. Customers benefit from lower working capital tied up in inventory and reduced administrative overhead; suppliers gain visibility that supports tighter production scheduling. The trade-off is that the supplier absorbs carrying costs and obsolescence risk. VMI is particularly widespread in automotive supply chains and retail distribution.