Supplier Managed InventorySupplier managed inventory is a means of optimizing supply chain performance, in which the manufacturer is responsible for maintaining stock levels distributors. The manufacturer has access to distributor inventory data and is responsible for generating purchase orders. During this process, the supplier is guided by specified goals regarding inventory levels, fill rates and transaction costs. A typical business model without VMI involves when a distributor needs a product, they place an order with a manufacturer. The distributor has complete control over the timing and size of the order placed. The distributor maintains the inventory plan. However, when using the vendor-managed inventory model, the manufacturer receives electronic data, usually through EDI (electronic data interchange) or via the Internet, that tells it the distributor's sales and inventory levels. The manufacturer can then view each item carried by the distributor as well as the actual point of sale data. The manufacturer becomes responsible for creating and maintaining the inventory plan. Under VMI, it is the manufacturer who generates the order, not the distributor. Note that VMI does not change the "ownership" of the inventory. It remains as it was before VMI. VMI consists of two EDI transactions that form the basis of the process: • Product activity record; The data contained in this document is sales and inventory information. This is the main transaction. The second transaction contains and processes the product numbers and quantities ordered by the supplier at the customer's request. In all its forms, VMI should aim to improve visibility of demand and product flow in a supply chain, facilitating a greater rapid and accurate replenishment process between a supplier (seller) and a stock location (customer, distributor, distribution center, etc.). Application of VMI can be done at any time within a supply chain: Manufacturer – Wholesale DistributorWholesale Distributor – RetailManufacturer – End CustomerWholesale Distributor – End CustomerManufacturer – Internal Inventory SitesInventory is the Proxy information. In the absence of current and accurate consumption data, each node in the supply chain compensates for the lack of information with inventory. Not only does poor information flow create inventory in the supply chain, it also restricts each company's ability to respond to increased demand, causing prolonged outages, service interruptions, and loss of revenue. sales. As actual product demand is disseminated throughout the supply chain in a real-time environment, the more closely production is aligned with demand. As the gap between production and demand decreases, supply chain inventory and service level disruptions also decrease..