Posted in Operations and Supply Chain Terms, Total Reads: 1012
Definition: Co-managed Inventory
Co-managed inventory or CMI is a business arrangement made between the supplier and the customer. It is a case of collaboration between the two. In case of co-managed inventory the consumable items are stored at the customer’s premises. After the consumables are utilized fully or are depleted, the items are replaced by the seller. The replacement of items by the seller are done with the consent and the knowledge of the customer.
Co-managed inventory is similar to vendor managed inventory (VMI). In case of vendor managed inventory a business model is set up between the buyer of the product and the vendor (supplier of the product). In case of VMI, the customer provides information to the vendor or the supplier about the product he needs. The supplier takes the full responsibility for maintaining the decided level of inventory of the materials demanded at the buyer’s location/premises. A third party can be involved in such a set up as a logistics provider to ensure that the buyer has the required level of inventory at all times by adjusting the demand and supply gaps that exist.
CO-managed inventory (CMI) is similar to vendor managed inventory (VMI). But in case of CMI the supplier takes responsibility to manage the replenishment process of the inventory and develops forecasts in the customer’s system accordingly. In case of CMI, the customer provides access to the system to the supplier. The supplier is the one who reviews all information and generates order in the customer’s system. However, the main difference between CMI and VMI is that in case of CMI the order placed by the supplier is just a recommendation and is not a confirmed order unless the customer approves it. In case of VMI, the order generated by the supplier on the customer’s behalf is a confirmed order and the supplier is responsible to deliver the product and bill the customer for the materials delivered.