Vendor Managed Inventory: Mitigating the Negative Impact on Cash Flow Caused by Inefficient Inventory Management

Insufficient inventory management systems can negatively affect the profitability of a business organization. Supply chain managers who do not have efficient inventory management systems risk insufficient cash flow and loss of profitability. Grounded in Goldratt’s theory of constraints, the purpose of this qualitative pragmatic inquiry was to explore strategies supply chain managers use to mitigate the negative impact on cash flow caused by inefficient inventory management systems. The participants were five manufacturing supply chain management professionals who have managed, implemented, or maintained traditional inventory management (TIM) programs or vendor-managed inventory (VMI) programs. Data were collected using semistructured interviews and publicly available company documents about TIM and VMI programs. Using thematic analysis, four themes were identified: (a) TIM programs are familiar and allow for visible internal control of inventory management; (b) TIM programs are inflexible, require oversight, and are costly; (c) VMI programs are adaptable, reliable, and cost-effective; and (d) VMI programs can lack full transparency and be challenged by demand spikes. A key recommendation is for supply chain managers to provide full transparency related to demand forecasting, leading to the accurate and deliberate exchange of viable information needed for an efficient and profitable inventory program. The implications for positive social change include the potential to maintain the continuity of supply chains and support employment in local communities by providing stable employment in manufacturing companies contributing to supply chains.