Vendor Managed Inventory refers to a business relationship between two parties in the same supply chain, in which the buyer outsources to their supplier the stock control of the materials purchased by the buyer from the supplier, which are typically held in stock on the buyers’ premises. The additional responsibility for inventory control changes the role of the supplier from simply a provider of goods, to the provision of a comprehensive service. Vendor managed inventory is a natural development from consignment stock, in that the buyer only pays for the materials when they are issued from stock and hence there is a degree of risk sharing between the parties.
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