Vendor Managed Inventory is looked upon as a reliable method for inventory management. There is still a scope for improving the process. In this work, we presented a report on the pilot setting and its testing for Vendor Managed Inventory in an auto parts manufacturing company in Northern India. The pilot study was conducted by switching supplies of six components of an assembly from conventional to VMI mode. The switch was carried out in January 2018 and a time series plotting of five performance indicators nine months prior to and nine months after the switch was done and analysed. Further, transition probabilities of inventory performance index were estimated based upon the correlations with four most influential performance indicators. Sixteen state switching scenarios were modelled and Markov chain analysis of Inventory Performance Index fortwo of them was carried out to test the VMI performance.