Question

In VMI, which is a benefit for both the supplier and retailer?

a) Lower inventory costs
b) Lower labor costs
c) Fresher products
d) Shorter cash-to-cash cycle

Answer 1

In Vendor Managed Inventory (VMI), both the supplier and retailer benefit from lower inventory costs because the supplier takes responsibility for managing and restocking inventory, thus optimizing inventory levels and reducing related costs for both parties.

Step-by-step explanation:

In Vendor Managed Inventory (VMI), both the supplier and the retailer benefit from a shared advantage, which is a) Lower inventory costs. Under VMI, the supplier maintains the inventory levels, taking responsibility for monitoring the retailer's inventory and making the necessary decisions about restocking. This collaboration typically means the supplier can better match supply with the retailer's demand, leading to an overall reduction in inventory levels. As a result, both parties can experience lower inventory carrying costs, less unsold stock, and improved shelf-space management.