Analysing the effectiveness of vendor-managed inventory in a single-warehouse, multiple-retailer system

Mohd Kamarul Irwan Abdul Rahim, El-Houssaine Aghezzaf, Veronique Limère and Birger Raa

International Journal of Systems Science, 2016, vol. 47, issue 8, 1953-1965

Abstract: This paper considers a two-stage supply chain, consisting of a single warehouse and multiple retailers facing deterministic demands, under a vendor-managed inventory (VMI) policy. It presents a two-phase optimisation approach for coordinating the shipments in this VMI system. The first phase uses direct shipping from the supplier to all retailers to minimise the overall inventory costs. Then, in the second phase, the retailers are clustered using a construction heuristic in order to optimise the transportation costs while satisfying some additional restrictions. The improvement of the system's performance through coordinated VMI replenishments against the system with direct shipping only is shown and discussed in the comparative analysis section.

Date: 2016
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DOI: 10.1080/00207721.2014.965771

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