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Benefits of Vendor Managed Inventory

The Benefits of VMI are numerous for both Manufacturer & Distributor. Here is a partial Listing:


  • Data entry errors are reduced due to computer to computer communications. Speed of the processing is also improved.
  • Both parties are interested in giving better service to the end customer. Having the correct item in stock when the end customer needs it, benefits all parties involved.
  • A true partnership is formed between the Manufacturer and the Distributor. They work closer together and strengthen their ties.
  • Stabilize the timing of Purchase Orders - PO's are now generated on a predefined basis.


  • The goal is to have an improvement in Fill Rates from the manufacturer and to the end customer. Also, a decrease in stock-outs and a decrease in inventory levels.
  • Planning and ordering cost will decrease due to the responsibility being shifted to the Manufacturer.
  • The overall service level is improved by having the right product at the right time.
  • The manufacturer is more focused than ever on providing great service.


  • Visibility of the Distributor’s Point of Sale data makes forecasting easier.
  • Promotions can be more easily incorporated into the inventory plan.
  • A reduction in Distributor ordering errors (which in the past would probably lead to a return)
  • Visibility of Stock Levels helps to identify priorities (replenishing for stock or a stock-out?). Before VMI, a manufacturer has no visibility of the quantity and the products that are ordered. With VMI, the manufacturer can see the potential need for an item before the item is ordered.

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