Certified Supply Chain Professional (CSCP) Practice Exam

What condition regarding ownership of inventory might be required in a VMI partnership?

1. Supplier must give up ownership of all products

2. Customer must stock all product lines

3. Supplier might need to compete for business

4. Customer manages product display entirely

The correct answer is: Supplier might need to compete for business

In a Vendor Managed Inventory (VMI) partnership, the supplier typically takes on more responsibility in managing the inventory levels at the customer's location, which can lead to a competitive dynamic. The supplier may need to compete for business by ensuring that they not only maintain the right inventory levels but also provide better service or value compared to competitors. This competitive aspect is crucial because, in a VMI model, the supplier often decides what to supply and how much based on the customer's usage and demand patterns. Therefore, suppliers must be proactive in demonstrating that their products and services are the best choice for the customer, enhancing the partnership and responding to market needs. The other options imply rigid conditions that do not align with the fundamental nature of VMI partnerships. For instance, giving up ownership of all products isn't a typical requirement of VMI, as suppliers often retain ownership until the products are consumed or sold. Similarly, requiring customers to stock all product lines undermines the flexibility of inventory management that VMI is intended to promote. Lastly, stating that the customer manages product display entirely may not reflect the collaborative effort usually seen in VMI, where suppliers often have a role in how products are displayed based on their understanding of consumer behavior and trends.