VMI (Vendor Managed Inventory)

Definition

Under VMI (Vendor Managed Inventory), the supplier takes responsibility for the inventory inside the customer's warehouse or on the customer's shelf. The customer shares sales and stock data; the supplier schedules automatic replenishments calibrated on real consumption, not ad-hoc orders.

Difference vs. classic orders

• Classic: customer emits PO → supplier ships → invoice

• VMI: supplier sees stock → proposes ASN → ships → consignment or invoice

Outcome: lower stock at customer, no shelf gaps (out-of-shelf), more stable production planning for supplier.

Benefits for both sides

For the supplier: sell-out visibility, stable production planning, higher retention, multi-year contracts.

For the customer: stock cut by 25-40%, out-of-shelf cut by 60-80%, zero time on replenishment ordering.

Technical implementation

• Daily exchange of stock + sales (EDI INVRPT or API)

• Replenishment algorithm based on min stock, lead time, seasonality, MOQ

• Automatic ASN proposals with one-click customer approval, or fully automated

• Monthly consignment reconciliation → fiscal invoice

Pitfalls

1. Bad data = bad decisions. If customer ERP stock is wrong, the algorithm asks for too much or too little.

2. No SLAs. Out-of-shelf definition, who pays for empty shelf must be defined contractually.

3. Underestimating cultural change. The customer's buyer loses apparent control - needs internal buy-in.