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Overview : |
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Companies that purchase fuels, chemicals, solvents and other products often have to make a choice: either reduce costs by keeping inventory levels low, risking run-outs and lost sales, or keep enough surplus inventories on hand to be prepared for unforeseen spikes in product demand, which tends to drive up inventory costs and market price risks.
Vendor-managed inventory is a system by which the distributor (seller) of products (e.g. fuels) monitors and manages a customer's (buyer's) inventory levels, oftenthrough a system of automated data collection and analysis. When product inventories drop below a specified level, the distributor dispatches a delivery based on previously agreed-upon criteria.
By utilizing VMI, buyers are able to have the inventory available as soon as the need arises, without incurring the costs and risks of keeping a large surplus on hand. Buyers are assured of a reliable supply of product while avoiding higher than necessary inventories and the associated cost of capital.
VMI fosters lasting relationships between distributors and customers through the effective use of technology. |
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