Cyclic Consumption and Replenishment Decisions for Vendor-Managed Inventory of Multisourced Parts in Dell’s Supply Chain

Abhilasha Prakash Katariya (), Sıla Çetinkaya () and Eylem Tekin ()
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Abhilasha Prakash Katariya: Department of Industrial and Systems Engineering, Texas A&M University, College Station, Texas 77843
Sıla Çetinkaya: Department of Industrial and Systems Engineering, Texas A&M University, College Station, Texas 77843
Eylem Tekin: Department of Industrial Engineering, University of Houston, Houston, Texas 77204

Interfaces, 2014, vol. 44, issue 3, 300-316

Abstract: Multisourcing and vendor-managed inventory (VMI) programs with percentage supply allocations (PSAs) are two common practices in the electronics industry. A PSA is a prenegotiated percentage of a multisourced part’s total demand, which should be provided by a supplier. For parts within Dell’s supply chain for which these practices are applicable, we provide a framework to implement pull-based replenishments, verify its feasibility, and demonstrate the potential benefits via simulation. Specifically, we investigate two decisions to meet customer demand and PSAs with minimal inventory: (1) how to allocate actual customer demand among multiple suppliers, and (2) what guidelines Dell should specify to suppliers for VMI hub replenishments. For demand allocations, we propose a consumption cycle based on the PSAs. We consider a heuristic replenishment policy and develop an algorithm to compute the policy parameters, which can be used as supplier guidelines. The proposed approach presents a significant opportunity for cost savings. Dell used the results of this project (1) to address skepticism toward a pull-based approach in managing VMI replenishments, (2) to gain stakeholder support to implement a pull-based approach, and (3) to emphasize the need for a change in Dell’s philosophy on managing demand allocations to suppliers and VMI hub replenishments.

Keywords: demand allocation; inventory decisions; multisourcing; supply allocation; vendor-managed inventory (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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