The purpose of this paper is to investigate the concept of Vendor Managed Inventory (VMI) from an inter-organisational perspective. Extant literature on VMI tends to investigate the concept from a focal perspective, even though VMI has originally been born as a collaborative arrangement. We argue that contemporary research has delimited the analysis of VMI to a focal company perspective as current VMI cost models tend not to capture the picture of the complete supply chain. The paper demonstrates through an illustrative case study that adoption of an interorganisational approach to VMI is vital if companies are to optimize their buyer-supplier relationships.