Vendor Managed Inventory (VMI), also known as Supplier Managed Inventory (SMI), is a business model in which the supplier (vendor) is responsible for maintaining an agreed level of the customer's inventory in regard to selected products. The customer regularly has to provide certain information such as consumption and stock level to the supplier. Based on this data, the supplier refills the customer's stock automatically without being ordered by the customer every time the stock has to be refilled.
The application of VMI provides advantages for both customer and supplier:
Waller, M.; Johnson, M.; Davis, T. (2001). Vendor-managed inventory in the retail supply chain. [online] Journal of Business Logistics. Accessed January 6, 2012.