Exam CSCP topic 1 question 637 discussion

C. processes payment for a replenishment order.** In a **vendor-managed inventory (VMI)** environment, the supplier (vendor) manages the inventory levels for the buyer, and the buyer typically pays for the goods **after they are consumed or sold**. The **cash-to-cash cycle time** measures the time between when a company pays for its inventory and when it receives payment from its customers. For the buying firm in a VMI arrangement, this cycle begins when it **processes payment for a replenishment order**, as this is when cash leaves the company.

When a company operates in a vendor-managed inventory (VMI) environment, the cash-to-cash cycle time for the buying firm begins when they A. receives a fulfillment order. Explanation: In VMI, the supplier manages the inventory levels for the buyer. This means the buyer doesn't need to place orders or monitor inventory levels. The supplier uses real-time data to determine when and how much to replenish. The buyer only initiates the process by providing access to their inventory and sales data. Once the supplier decides to replenish, they send the goods and an invoice. The buyer's cash-to-cash cycle then begins when they receive the goods and are liable for payment.

In a vendor-managed inventory (VMI) environment, the cash-to-cash cycle time for the buying firm begins when it places a replenishment order. This is because the vendor is responsible for managing the inventory levels of the buyer, and the buyer only pays for the inventory when it is shipped from the vendor.