Vendor-Managed Inventory Flashcards

Which supply chain structure is VMI most closely associated with?

Answer: Collaborative planning, forecasting, and replenishment (CPFR)

VMI is a foundational element of CPFR, where both supplier and retailer share data and collaborate on replenishment decisions.

A distributor using VMI for a hospital client sets a reorder point of 500 units and a target level of 1,200 units. Current stock is 480 units. What should the distributor do?

Answer: Replenish 720 units to restore the target level

When stock falls below the reorder point, the vendor replenishes up to the target level: 1,200 − 480 = 720 units.

What is the main disadvantage VMI poses for the customer organization?

Answer: Loss of direct control over inventory replenishment decisions

Ceding replenishment decisions to the vendor means the customer must trust the supplier's judgment and data accuracy.

Which industry was among the first to pioneer large-scale VMI implementation?

Answer: Mass-market retail / consumer packaged goods

Walmart and Procter & Gamble's partnership in the late 1980s is the landmark early VMI success story in consumer packaged goods.

In a VMI contract, the vendor's replenishment authority is typically bounded by:

Answer: Min/max inventory parameters agreed upon with the customer

Min/max parameters define the floor (reorder point) and ceiling (target stock level) within which the vendor manages replenishment.

How does VMI typically affect a supplier's transportation costs?

Answer: Can reduce costs by enabling consolidated, optimized shipment scheduling

With control over timing, the supplier can consolidate loads and optimize routes, often reducing per-unit transportation cost.

A technology prerequisite for successful VMI implementation is:

Answer: Real-time inventory visibility systems at the customer's location

The vendor must see current inventory levels at the customer's site in real time to make accurate replenishment decisions.