Question

How does VMI improve supply chain coordination? Select one:

a) The supplier treats the retailer with priority compared to all other retailers it serves.

b) The supplier uses POS data in order to replenish immediately every time the retailer sells the product.

c) The supplier determines inventory levels and inventory replenishment policies at the retailer in order to optimize production/shipments.

d) The retailer does not share forecast data with the supplier in order not to impact the production plans.

Answer 1

Answer: (c) The supplier determines inventory levels and inventory replenishment policies at the retailer in order to optimize production/shipments.

Explanation: VMI, better known as Vendor Managed Inventory, is one of the most common and traditional method of managing inventory by the retailers. In vendor managed inventory systems, a vendor (or supplier) manages the inventory for the retailer, instead of the retailer itself managing its inventory.

For example, in a barber shop, the sales executive or any other vendor representative will visit the barber’s store, will look at the inventory levels of different personal grooming products used at the store and will replenish the quantities keeping in mind the replenishment policies of the barber shop. Here, the supplier himself determines the inventory levels and replenishes the products thereby, avoiding a stock-out situation.