Vendor-Managed Inventory Flashcards

What is the primary difference between VMI and traditional buyer-managed replenishment?

Answer: In VMI, the supplier decides when and how much to replenish; in traditional, the buyer does

The defining characteristic of VMI is that replenishment authority is transferred from the buyer to the supplier.

Which metric helps evaluate whether a VMI program is reducing excess inventory for the buyer?

Answer: Inventory turnover ratio

A rising inventory turnover ratio indicates that the vendor is keeping stock lean and aligned with actual demand rather than overstocking.

In a manufacturing VMI scenario, raw material suppliers monitoring the manufacturer's production schedule directly is an example of:

Answer: Production-triggered replenishment

When suppliers use the customer's production schedule as the replenishment trigger, they replenish based on planned consumption rather than historical demand.

A retailer wants to implement VMI but is concerned about giving a supplier competitive intelligence. The best mitigation strategy is:

Answer: Sharing only aggregated SKU-level data with category-level access restrictions

Limiting data granularity to what the supplier needs for replenishment decisions protects sensitive competitive information while enabling VMI.

The transition from traditional purchasing to VMI typically requires the buyer's organization to shift focus toward:

Answer: Supplier performance management and relationship oversight

With transactional ordering delegated to the vendor, the buyer's role evolves to monitoring vendor performance and managing the VMI partnership.

Which scenario represents an appropriate use case for implementing VMI?

Answer: High-volume, fast-moving items with stable demand from a strategic supplier

VMI delivers the greatest value when demand is predictable, volume is significant, and a long-term supplier relationship justifies the data sharing investment.

A company implementing VMI should expect which of the following changes to its cash flow?

Answer: Improved cash flow if consignment terms shift inventory ownership to the supplier

Consignment VMI defers payment until goods are consumed, reducing the working capital tied up in inventory and improving the buyer's cash position.