What is the term for when a vendor monitors and manages inventory for the customer?

The term that describes the situation where a vendor monitors and manages inventory for the customer is Vendor-Managed Inventory (VMI). In this arrangement, the vendor takes responsibility for maintaining the inventory levels at the customer's location, ensuring that stock is replenished as needed without the customer having to place orders. This system allows for more efficient inventory management, as the vendor typically has better visibility into usage patterns and can optimize replenishment schedules based on actual sales data.

Vendor-Managed Inventory benefits both parties; the customer enjoys reduced administrative burdens and stockouts, while the vendor can streamline their supply process and potentially increase sales through better inventory management. This active collaboration helps improve overall supply chain efficiency and responsiveness to market demand.