What is vendor-managed inventory (VMI)?

Vendor-managed inventory (VMI) is correctly identified as a practice where suppliers manage inventory levels. This approach allows suppliers to take responsibility for maintaining the inventory of their products at the buyer's location. By sharing data and insights about inventory levels, sales forecasts, and demand patterns, suppliers can optimize stock levels, reduce excess inventory, and minimize stockouts.

The benefits of VMI include improved supply chain efficiency, enhanced collaboration between suppliers and buyers, and the ability to respond more effectively to changes in demand. By allowing suppliers to manage inventory directly, companies can reduce the burden on their own resources and focus more on core business activities.

In contrast to the other options, the choices reflect different concepts. For instance, customers managing their own inventory emphasizes a self-service model which is not the essence of VMI. A strategy for marketing products pertains more to promotional tactics rather than supply chain management, and a system for reporting supplier performance focuses on evaluation metrics rather than inventory management practices. Thus, the core of VMI lies in the proactive role suppliers play in overseeing inventory management on behalf of their customers.