What is the purpose of a supplier owned inventory?

The purpose of supplier-owned inventory is primarily to allow suppliers to manage their own products. This approach enables suppliers to retain ownership of inventory until it is used by the buyer. It facilitates better inventory management directly by the supplier, who can optimize their stock levels and logistics processes based on real-time demand information from the buyer.

This arrangement can foster a closer partnership between the supplier and the buyer, allowing for increased flexibility, efficiency, and responsiveness in the supply chain. It helps minimize the buyer's risk of excess inventory and can lead to cost savings and better service levels, as suppliers are incentivized to ensure their products are available when needed without the buyer needing to invest upfront in stock.

For instance, if a company uses just-in-time inventory practices, having supplier-owned inventory means that the supplier can more effectively respond to the changing needs of the company without the delays that may occur when inventory must be sourced from a third party. Thus, option B accurately captures the essence of the supplier-owned inventory arrangement.