Final answer:
VMI (Vendor Managed Inventory) is the practice of buyers allowing suppliers to observe their demand, create a forecast, and determine their resupply schedules in the hopes of reducing inventories.
Step-by-step explanation:
The practice of buyers allowing suppliers to observe their demand, create a forecast, and determine their resupply schedules in the hopes of reducing inventories is called VMI (Vendor Managed Inventory).
VMI is a business model where suppliers take responsibility for managing and replenishing inventory based on real-time data received from buyers. This approach helps to streamline supply chain operations, reduce stockouts, and minimize overall inventory carrying costs.
An example of VMI is when a retailer shares its sales data with a supplier, who then uses that information to predict demand and proactively restock the retailer's inventory.