Which description best defines vendor-managed inventory (VMI)?

• A. The customer handles all reordering internally.
• B. The supplier manages inventory levels at the customer's location.
• C. The shipper controls transit times.
• D. The factory sets production schedules.

Answer: (B)

Vendor-managed inventory means the supplier takes responsibility for keeping the stock of its product at the customer's location. The supplier watches the inventory levels, often using shared data on sales and on-hand quantities, and replenishes stock as needed so there’s always enough to meet demand. This shifts the process of deciding when and how much to reorder from the customer to the supplier, with the goal of reducing stockouts and cutting administrative work for the buyer while keeping supply flowing smoothly. For example, if shelf levels drop to a pre-set point, the supplier automatically ships more units to the retailer. Other descriptions describe someone else handling reordering, controlling transit timing, or setting production schedules, which are different functions and not what VMI is about.