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Vendor Managed Inventory is an approach to inventory and order fulfilment whereby the supplier, not the customer, is responsible for managing and replenishing inventory. This appears at first sight to counter the principle of pull scheduling, because the preceding process (the manufacturer) is deciding how many and when to send to the next process (the retailer).

In practice, the basis on which decisions will be made is agreed with the retailer beforehand, and is based on the retailer's sales information. Under VMI, the supplier assumes responsibility for monitoring sales and inventory, and uses this information to trigger replenishment orders. In effect, suppliers take over the task of stock replenishments. VMI can relieve the customer of much of the expense of ordering and stocking low-value Maintenance and Replacement Policies (MRO) items.

Automated VMI originated in the late 1980s with department stores in the USA as a solution to manage the difficulties in predicting demand for seasonal clothing. Prior to this manual VMI had been around for many years, particularly in the food industry. Under manual VMI, the manufacturer's salesman took a record of inventory levels and re-ordered product for delivery to the customer's store, where the manufacturer's representative would re-stock the shelves. As product variety has increased and life cycles have shortened, manual VMI has been replaced by automated VMI.

Vendor Managed Inventory is a Just-In-Time technique in which inventory replacement decisions are centralized with upstream manufactures or distributors. Acronyms for VMI include: -