What is a defining characteristic of 'Vendor Managed Inventory' (VMI)?

The defining characteristic of Vendor Managed Inventory (VMI) is that suppliers take responsibility for managing inventory levels at customer locations. In a VMI arrangement, the supplier closely monitors the customer's inventory and is responsible for replenishing stock as needed. This approach allows the supplier to optimize inventory levels and reduce the risk of stockouts or overstock situations. By having the supplier manage the inventory, it ensures that the supply chain operates more efficiently, with better alignment to consumption patterns.

This model shifts the control of inventory management away from the customer, allowing for a more streamlined process where the supplier can respond quickly and effectively to the customer's needs. The collaborative nature of VMI fosters a stronger partnership between supplier and customer, promoting reliability and potentially lowering costs.

In contrast, the other options do not accurately describe VMI. For example, having customers manage inventory levels would not align with the core principle of VMI, where the supplier assumes that role. Maintaining inventory at a single central warehouse does not encompass the decentralized nature of VMI, which involves direct stock management at various customer locations. Lastly, stock rotation by a third-party logistics provider diverges from the typical VMI framework, as in VMI the supplier is the one managing the inventory, rather than outsourcing that responsibility