What is vendor-managed inventory (VMI)?

Essentially, vendor-managed inventory (VMI) usually means that the manufacturer will manage the inventory of its products (and possibly related products) at the retailer's warehouse(s) and reorder as appropriate for customer fulfillment. The manufacturer may also have a representative at the designated retail warehouse locations to assure accurate and timely delivery. The retailer should experience lower costs associated with inbound logistics, and the manufacturer should be able to offset its additional cost with increased sales (fewer stockouts, more complete orders, etc.) because of the more accurate and timely information of product orders at the store level.