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Implenentation of VMI

A simple model of VMI is shown in the following figure: -

The model is based on the assumption that the customer has entered into a collaborative or partnership agreement with a distributor under which the latter agrees to stock a specified range of items and meet specified service levels. In return the customer undertakes to buy the specified items solely from the distributor and no longer keeps the item in stock. There must, therefore, be a high level of trust between the customer and the distributor.

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* Contributed by -
Guruprasad Pasupulety,
MBA - Batch of 2007,
Tallinn University of Technology, Estonia.