Question

Explain the concept of vendor manged inventory

Answer 1

Answer - Vendor managed inventory is a business model wherein the product buyer informs the vendor about the product details who then take over the entire responsibility of buying and maintaining the required stock for the buyer. This system has several advantages like:

• Solves the problem of insufficient stock when required
• Better inventory turnover rate
• More stable supply chain

Vendor managed inventory is implemented in the following steps:

• Requirements are communicated from buyer to vendor
• Vendor places order
• The supplier delivers the order along with adequate receipts
• Stock is tested
• If the supplier is found satisfactory then the process is repeated

Large companies like Walmart, Amazon use this system of vendor managed inventory as they find it beneficial to deal with their buying process through a vendor.