Question

Walmart uses a vendor-managed inventory system, where the inventory is owned and managed by a vendor until it is delivered from Walmart's distribution center to the stores. What implications does the system have for Walmart's purchases and payments process?

Answer 1

Vendor management technique is a process or business model in which the vendor is responsible for maintaining inventory and suppling them in accordance with the preferences of the buyer at their locations.

Based on the above definition we can derive the following implications and payment process.

1. Since the inventory Is managed by vendor (supplier) the frequency of purchases and economic order quantity and reorder levels are determined at vendors location and communicated to the distribution channel of Walmart.

2.The Payment process can also be altered by authorizing the supplier or vendor to pay on behalf of Walmart which can be setoff against net payable to Walmart.