Pour the milk into a non-reactive pot and turn the heat on between medium and medium-high. 

Put a thermometer on the side of the pot, when the thermometer hits 110 degrees F start stir occasionally so the temperature in the milk stays consistent and the milk on the bottom doesn't burn.  Or you can use a double boiler system to avoid stirring. 

At 180 degrees take the milk off the burner and turn off the heat.

Let the milk cool to 90-110 degrees, then add the dry milk and let it hydrate for 5 minutes.  Once hydrated, stir for 60 seconds with a whisk or until you don't see any  more 'chunks' of powdered milk. 

Add the yogurt or yogurt starter (amount according to starter directions) to the milk mixture and stir for 30 seconds. 

Add vanilla (optional) and stir.

Keep at about 80 degrees or warmer for 10 hours and then refrigerate.