VMI is a process where the supplier generates orders for the customer based on demand information sent by the customer. During this process the supplier is guided by mutually agreed to objectives for inventory levels, fill rates and transaction costs.
There are two EDI transactions at the heart of the process. The first is the Product Activity Record, frequently referred to as an 852. The data contained in this document are sales and inventory information. The inventory data is typically segmented into various groups such as on hand, on order, committed, back ordered and so forth. This transaction is the backbone of VMI and is sent by the customer on a prearranged schedule, typically, daily. The decision to order is based on this data.
The business process fed by this data is relatively simple. The supplier reviews the information that has been sent in by the customer on the 852 to determine if an order is needed. This review of the data varies by supplier and the software being used, but, many things are consistent.