In VMS, the producer, wholesaler and retailer act as a unified system. This is generally achieved by having one player owning all three levels of distribution. The producer can also obtain channel control by having its own franchisees playing the role of different channel players like retailer.
Contractual VMS is a channel system formed by individual firms operating as different channel players, integrating their operations on contractual basis. This helps each of the players to achieve economies of scale by integrating their operations. Hence, they are also called “Value- adding partnerships”.