The Cost Analysis of Vendor Managed Inventory

In this paper, we will show that, from the perspective of cost savings VMI allows the companies to cut total inventory-related cost and thus provides a strong incentive for both to integrate their inventory systems. For the supplier handles the combined inventory system, the supplier's inventory costs under VMI are likely to increase. However, we can also show a possibility that the supplier's inventory-related cost with VMI is less than without VMI.