Compare and contrast vendor-managed inventory (VMI) model and traditional inventory model. List the benefits of the VMI model

What will be an ideal response?

Vendor-managed inventory (VMI) is a business model in which the suppliers to a manufacturer manage the manufacturer's inventory levels based on pre-established service levels. To make VMI possible, the manufacturer allows the supplier to monitor stock levels and ongoing sales data. Under a traditional inventory model, the manufacturer or retailer would manage these inventories themselves, sending out requests for additional items as needed. In contrast, under a VMI model, the manufacturer or retailer shares real-time sales data with the suppliers. The suppliers maintain inventory levels based on pre-established agreements. Such arrangements can help optimize the manufacturer's inventory, both saving costs and minimizing stockout situations (thus enhancing customer satisfaction); the supplier, in turn, benefits from the intense data sharing, which helps produce more accurate forecasts, reduces ordering errors, and helps prioritize the shipment of goods.