Today the market is moving toward multiformity, and it requires a variety in products, which in turn generates variation in demand that gives rise to many managerial problems such as planning, forecasting, production, inventory management, and timely distribution. To minimize the level of risk due to variation in demand, from raw materials to final customers, the whole process should undergo innovative and revolutionary changes. Organizations must emphasize on gaining competitive advantage by managing their supply chains in the most effective manner. Inventory performance directly connects to the success of supply chain management. This study attempts to find various Vendor Managed Inventory (VMI) elements which are important to both the customer and the manufacturer (vendor) in the Indian context. This paper presents the relative importance and difficulties in the implementation of VMI elements in the manufacturing sector and the results are subjected to Analysis of Variance (ANOVA). The study also identifies the VMI elements which are most important and easy to implement in the manufacturing industries.

Vendor Managed Inventory (VMI) was first practiced in the early 1980s by Wal-Mart and Procter & Gamble in which the vendors take up the responsibility of inventory management of retailers/customer based on sales figures made available by the retailer/customer. Nowadays, the industries outside retailing are also using the concept of VMI. VMI promises a win-win situation for both customer and manufacturer.

In VMI, the manufacturer maintains the inventory of the customer by receiving electronic messages, usually via Electronic Data Interchange (EDI), from the customer. These messages give information such as what the customer has sold and what the manufacturer currently has in inventory. The manufacturer analyzes this information and takes a decision regarding the generation of purchase order. The VMI policy is that the vendor becomes responsible for managing the customer inventory. This policy results in reduction in logistics cost and hence total inventory cost. This study attempts to find the various VMI elements which are important to both the customer and manufacturer (vendor) in the Indian context.

Supply Chain Management Journal, Evaluation, Vendor Managed Inventory Elements, Manufacturing Sector, ANOVA Technique, Vendor Managed Inventory (VMI), Analysis of Variance (ANOVA), Electronic Data Interchange (EDI).