Even with the possibility of employing a combination of MRP and JIT, supply chain managers are still seeking ways to reduce inventories up and down the supply chain. A pure JIT model certainly addresses the issue of inventory elimination, but the risk is just too great when dealing with suppliers, production variances and capricious clients in multiple countries. Like any business practice, inventory management is in a state of constant flux, with companies always looking for new methods and tactics to improve performance. Vendor-managed inventory (VMI), a fairly new practice for global operations, borrows from the past, benchmarks Efficient Consumer Response/Quick Response and employs new ways to bring inventory benefits to suppliers, manufacturers and, ultimately, the end user.

Although a newly coined term, the application of VMI in its original form is already somewhat misconstrued and used out of context. Now employed in regard to any type of inventory, the original application of VMI was limited to a raw materials and production environment. While recognizing the various iterations of VMI, the fundamentals of the concept are as follows:

1. Multiple suppliers occupy a facility in close proximity to the manufacturer's site, retaining title to the goods until they are consumed in the production process.

2. Because the supplier retains title and is responsible for the well-being of the goods, the Incoterms (shipping terms) are in many cases either delivered duty paid or delivered duty unpaid.

3. The supplier is responsible for replenishment and in some cases also...