Managing inventory through (Q, r) policy for a VMI programme with freshness clause

Shihua Ma, Danfeng Ying, Xu Guan and Kun Huang

International Journal of Applied Management Science, 2013, vol. 5, issue 2, 129-143

Abstract: This paper considers the inventory management in a VMI programme consisting of a vendor, a retailer and a VMI warehouse near the retailer. Specifically, the vendor is authorised to manage the inventory of the VMI warehouse through (Q, r) policy, and the retailer controls the service level of the warehouse by setting a minimum inventory level z. Besides, to reduce the vendor's high inventory cost, a freshness clause is introduced. Our main finding is that under a given freshness clause, there exist the optimal (Q*, r*) for the vendor, and z* for the retailer. Based on this, we derive the conditions satisfied with (Q*, r*) and propose an iterative algorithm for solving z*. Furthermore, the freshness clause's impact on each participant's optimal decisions and the managerial implications are illustrated via numerical analysis.

Keywords: VMI; vendor-managed inventory; (Q, r) policy; minimum inventory level; freshness clause; inventory management. (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:injams:v:5:y:2013:i:2:p:129-143

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