A number of small businesses try to mitigate their expenditure by opting for vendor managed inventory (VMI). It is a very commonly used business model where businesses simply negotiate contracts with suppliers. The supplier then has to keep a minimum level of inventory at all times, usually at the location where the buyer can access it easily. Essentially, a certain amount of the inventory is just being made available at the buyer’s location. VMI is a commonly adopted model nowadays.
Why Is it So Popular?
One of the reasons why vendor managed inventory (VMI) is so popular is because it mitigates the capital investment by the buyer. Instead of buying inventory, they simply keep the supplier’s inventory on site. Essentially, whenever a sale is made, the buyer will give a part of the proceeds to the supplier directly. This is ideal for small businesses that can’t afford to buy lots of inventory and keep it on site at all times.
A Viable Solution
Business models, such as vendor managed inventory (VMI), have made it easy for entrepreneurs to quickly start selling. It’s a viable solution because it mitigates the risks for both parties and reduces barriers to entry for most fields. It’s an ideal way for businesses to scale without having to tie up large amounts of their capital in inventory. This can make things easier for entrepreneurs, as they can look to optimize their costs as their business grows.
