Final answer:
Vendor Managed Inventory (VMI) (option a) is a system where suppliers manage customer's inventory based on set parameters, effectively streamlining the supply chain and reducing carrying costs.
Step-by-step explanation:
The type of inventory management system where a supplier manages the inventory policy of an item or group of items for a customer is known as Vendor Managed Inventory (VMI). In this approach, the supplier makes the main inventory replenishment decisions for the customer based on predetermined inventory levels, demand information, and stock on hand. This collaborative strategy aims to enhance supply chain efficiency by reducing inventory levels and associated carrying costs while ensuring that the right amount of stock is available when needed.
With VMI, suppliers typically monitor the buyer's inventory levels either directly or through electronic means and make timely deliveries to maintain those levels. The partnership helps prevent stockouts, streamline the order process, and often improves inventory turnover, which are crucial benefits for both suppliers and buyers.