What positive outcome does vendor-managed inventory commonly lead to?

Vendor-managed inventory (VMI) is a supply chain practice where the supplier, rather than the retailer or buyer, is responsible for managing the inventory levels of their products. This approach has several positive outcomes, one of which is reduced carrying costs.

When suppliers take on the responsibility of inventory management, they can more accurately match supply with demand, leading to lower inventory levels for the buyer. By optimizing stock levels, VMI minimizes excess inventory that incurs carrying costs such as storage, insurance, and obsolescence. Therefore, streamlined inventory management facilitates better planning and reduces waste, ultimately leading to financial savings for companies involved.

Additionally, VMI fosters a closer relationship between suppliers and buyers, which can lead to more efficient restocking processes and better responsiveness to market changes. The positive impacts on cash flow and operational efficiency further contribute to reduced carrying costs.