Vendor managed inventory (VMI) are also covered by our offer and require a certain type of handling.
Normally, you and your organization are responsible for determining correct inventory management parameters and providing suppliers with purchase orders that contain a targeted replenishment quantity. In practice, available inventory is netted from demand requirements to achieve a net requirement. This is adjusted according to lead time and other parameters to create a purchase order. In a vendor managed inventory (VMI) concept, such as Optilon’s, the responsibility of determining how much to deliver lies with the supplier, according to jointly agreed inventory targets. This implies that inventory netting is not done, and the supplier has visibility to gross demand, and available inventory at the customer. A benefit with VMI is that the bullwhip effect in the supply chain can be reduced, as suppliers have more direct visibility to customer data. VMI is often combined with consignment stock, creating an incentive structure that encourages suppliers to maintain appropriate safety stock levels on behalf of their customers.