Which statement about Vendor Managed Inventory (VMI) is true?

Which statement about Vendor Managed Inventory (VMI) is true?

• A. Supplier manages stock levels; benefits include reduced stockouts and lower administrative burden; risks include reduced buyer control and dependency on supplier.
• B. VMI transfers stock management responsibility to the buyer.
• C. VMI eliminates the need for coordination with suppliers.
• D. VMI increases inventory levels at all locations.

Answer: (C)

Vendor Managed Inventory means the supplier takes responsibility for monitoring the buyer’s stock and replenishing it based on actual usage and agreed service levels. This arrangement helps reduce stockouts and lowers the buyer’s administrative burden because replenishment is triggered by the supplier’s visibility into consumption rather than manual ordering. At the same time, it creates dependency on the supplier and reduces the buyer’s day-to-day control over stock, which is a trade-off to manage. Coordination is still essential in VMI. The supplier needs access to accurate usage data, forecasts, lead times, and agreed inventory targets in order to replenish effectively. So, the idea that VMI eliminates the need for coordination isn’t correct. It also isn’t about transferring stock management to the buyer, since the supplier handles replenishment. And it doesn’t inherently increase inventory levels at all locations; the goal is to optimize inventory and reduce total costs, though inventory levels can vary by situation.

Vendor Managed Inventory means the supplier takes responsibility for monitoring the buyer’s stock and replenishing it based on actual usage and agreed service levels. This arrangement helps reduce stockouts and lowers the buyer’s administrative burden because replenishment is triggered by the supplier’s visibility into consumption rather than manual ordering. At the same time, it creates dependency on the supplier and reduces the buyer’s day-to-day control over stock, which is a trade-off to manage.

Coordination is still essential in VMI. The supplier needs access to accurate usage data, forecasts, lead times, and agreed inventory targets in order to replenish effectively. So, the idea that VMI eliminates the need for coordination isn’t correct. It also isn’t about transferring stock management to the buyer, since the supplier handles replenishment. And it doesn’t inherently increase inventory levels at all locations; the goal is to optimize inventory and reduce total costs, though inventory levels can vary by situation.