What is the supply chain strategy where a supplier manages a buyer's inventory levels?

Vendor-managed inventory (VMI) is the supply chain strategy in which a supplier manages a buyer’s inventory levels.

Under VMI, the buyer shares sales, stock, or demand data with the supplier. The supplier then helps decide when and how much to replenish, rather than waiting for the buyer to place every order. The goal is to keep products available while reducing excess stock, emergency orders, and administrative work.

The arrangement became closely associated with large retail and consumer-goods supply chains, where suppliers can use near-real-time information to coordinate replenishment across stores or distribution centers. Ownership of the inventory and responsibility for carrying costs can vary by contract; VMI describes who manages replenishment, not a single mandatory payment arrangement.

Cross-docking moves goods through a facility with little or no storage. Dropshipping sends orders from a supplier directly to the customer. Just-in-time is a broader inventory philosophy focused on receiving goods close to when they are needed. Those concepts can be used alongside VMI, but they are not the definition asked for.