Retail supply chain and vendor managed inventory system: a review

Abstract

Vendor-managed inventory (VMI) is a new technique that has been popular for inventory management of retail supply chain. It is one of the most widely accepted partnering initiatives for improving multi-firm supply chain efficiency, also known as continuous replenishment or supplier-managed inventory. VMI partnership enables the suppliers to make vital decisions regarding inventory replenishment for retailers. Actually this VMI transfers the responsibility of inventory management from the retailers to the suppliers who may be obliged to meet a specific customer service goal. Implementation of VMI program offers a competitive advantage for retailers in terms of higher product availability and provides the supplier with opportunities to progress production and marketing efficiencies. Going into VMI contract may give the involved firms some benefits. But entering into a VMI can be challenging unless clear collaboration and communication between the manufacturer and supplier is established to ensure success. To be successful in VMI contract, it is necessary to ensure effective teamwork with strong participation by both manufactures and retailers. So before adopting VMI strategy in their supply chain, retailers should critically analyze its applicability.