Inventory is considered as one of the most important assets in any company, having a significant impact on the cash flow and the profit of the company. An increase of inventory indicates that the company has purchased more than required and reduces the financial performance. Better inventory management strategies help a company to plan operations and budgeting effectively and efficiently. Hence inventory management has become a core concern of any business. Inventory management can be defined as a process of ensuring the availability of enough products in stock while minimising the costs. Many inventory control techniques fail to keep balance between cost and product availability/service level. Therefore, companies tend to keep extra stock to mitigate supply chain risks occurred due to stock-outs. [1]. Vendor-Managed Inventory is one of the most widely-implemented partnering initiatives for improving inventory performance in supply chain operations. It involves a strategic relationship between a supplier and a buyer through better collaboration. Basically, the vendor manages inventory on behalf of the buyer, while the buyer shares information and operational plans with the vendor allowing them to replenish the inventories while optimising stock levels at the buyer’s consumption locations. A VMI strategy, which is a symbiotic relationship, allows the supplier to schedule their operations more productively because it enables monitoring inventory levels at the customer’s location on a regular basis. Customers will eliminate major stock-outs as the supplier has the ability to replenish inventory without interrupting customer’s operations [2]. In addition to avoid stock-outs, implementing VMI results in benefits such as reducing inventory costs for both buyer and supplier, improves customer service levels, reduces order cycle time and improves order fill rates. However, there are certain requirements for the success of VMI [3]. VMI implementation fails mainly due to lack of trust and collaboration between supplier and customer. Complicated logistics flows and complex distribution channels also contribute to failure of VMI [1]. In fact, many organisations in the world were able to achieve significant improvements with implementing VMI [4]. For example, world retail giants such as Wal-Mart improve their inventory performance by implementing VMI successfully. Research shows that there are many factors which determine effective VMI implementation. These include four key enablers, namely: quality of ICT systems, quality of information, intensity of information sharing, and relationship quality and considered them as the most important factors for VMI success [5].

Dayananda, K., & Jayaratne, P. (2017). Deterministic parameters for the success of vendor-managed inventory in Sri Lanka [Extended Abstract]. In T.L. Gunaruwan (Ed.), Proceedings of 2nd International Conference on Research for Transport and Logistics Industry 2017 (pp. 93-98). Sri Lanka Society of Transport and Logistics. https://slstl.lk/r4tli-2017/