Vendor Managed Inventory (VMI) has been around since the '80s and was invented by Procter & Gamble and Walmart. Since then, VMI became the number one distribution system for companies worldwide. For example, 80% of the electrical industry suppliers use the VMI program in their supply chain.
So, how does Vendor Managed Inventory work? When a company decides to start using the VMI system, it means that they authorize a supplier to manage inventories/stock at the customer location. The key of VMI is that stocking is being done based on data and analyses on the demand of the product. You might also have heard of Supplier Managed Inventory (SMI), and we can hear you wondering: ¨ What's the difference?¨. The difference is: VMI is specially made for suppliers, and SMI is set up for customers. But the concept is basically the same.