Multiple-vendor, multiple-retailer based vendor-managed inventory

Xianpei Hong, Wang Chunyuan, Lei Xu () and Ali Diabat

Annals of Operations Research, 2016, vol. 238, issue 1, 277-297

Abstract: Vendor-managed inventory is a coordinated system where a vendor decides about the retailer’s replenishment quantity and time. This work studies a two-echelon distribution work composed of multiple vendors and retailers in traditional and vendor-managed inventory systems where unsatisfied demands are lost sales. We also consider that the retailers’ demand is stochastic following a uniform distribution. The mathematical models are developed and applied in vendor-managed inventory and traditional systems. Under the traditional supply chain, the vendor incurs the cost of holding and production setup, while a retailer incurs expenses for inventory holding, ordering, transportation and lost sales. In a vendor-managed inventory system, as the vendor is responsible for his retailers, the retailer’s costs are transferred to the vendor. We aim to identify benefits of vendor-managed inventory. The total cost per unit time is used as a comparable measure between vendor-managed inventory and traditional systems. Numerical examples and a sensitivity analysis of key parameters include the vendor’s setup cost and holding cost; the retailer’s transportation and ordering costs are presented in both vendor-managed inventory and traditional systems. The results illustrate that vendor-managed inventory total system inventory cost is lower than a traditional system where shortage is allowed. Copyright Springer Science+Business Media New York 2016

Keywords: Shortage; Backorder; Vendor-managed inventory; Traditional system; Inventory; Total inventory cost per unit time; Two-echelon; Stochastic demand; Lost sales (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10479-015-2040-0

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