What is VOI in inventory management?

In inventory management, VOI refers to Vendor Owned Inventory. This concept involves a supply arrangement where the vendor or supplier retains ownership of the inventory until it is consumed or sold by the buyer. This arrangement can lead to several benefits, such as reduced carrying costs for the buyer, improved cash flow, and enhanced inventory turnover.

By maintaining control over the inventory, vendors can better manage supply levels and can also use this model to ensure their products are readily available when needed. This arrangement helps in fostering closer collaboration between suppliers and buyers, leading to a more responsive supply chain.

Understanding VOI is crucial in managing relationships with suppliers and optimizing inventory costs, as it ensures that both parties benefit from increased efficiency and reduced excess inventory.