Certified Supply Chain Professional (CSCP) Practice Exam

In a vendor-managed inventory agreement, what role does the supplier take on?

1. Only receives payments for goods sold

2. Determines storage and display of inventory

3. Exclusive authority to determine pricing for items

4. Acts solely as a shipment provider

The correct answer is: Determines storage and display of inventory

In a vendor-managed inventory (VMI) agreement, the supplier takes on a more proactive role in managing the inventory levels for the customer. This approach allows the supplier to decide on the optimal storage and display of inventory based on real-time data and understanding of the customer’s needs. By proactively managing inventory, the supplier can ensure that stock levels are maintained at the right amount, reducing the risk of stockouts or overstock situations. The responsibility of determining storage and display allows the supplier to utilize their expertise and knowledge of the product flow, ensuring that inventory is not only well stocked but also strategically placed for optimal sales performance. This arrangement often leads to better collaboration between the supplier and the customer and can significantly enhance supply chain efficiency. The other options do not encapsulate the full role of the supplier within a VMI framework. For example, merely receiving payments for goods sold does not reflect the strategic, active role the supplier has in inventory management. Exclusive authority to determine pricing is typically not part of a VMI agreement, as pricing strategies are usually negotiated separately. Finally, acting solely as a shipment provider does not take into account the inventory management responsibilities that are central to a VMI arrangement.