The value of VMI beyond information sharing in a single supplier multiple retailers supply chain under a non-stationary (Rn, Sn) policy

Devendra Choudhary, Ravi Shankar
2015 Omega : The International Journal of Management Science  
This study aims to determine the value of vendor-managed inventory (VMI) over independent decision making with information sharing (IS) under non-stationary stochastic demand with service-level constraints. For this purpose, we utilize mixed-integer linear programming formulations to quantify the benefits that can be accrued by a supplier, multiple retailers and the system as a whole by switching from IS to VMI. More specifically, we investigate the incremental value that VMI provides beyond IS
more » ... in terms of expected cost savings, inventory reductions, and decrease in shipment sizes from the supplier to the retailers by conducting a large number of computational experiments. Results reveal that the decision transfer component of VMI improves these performance measures significantly when the supplier's setup cost is low and order issuing efficiency is high. The benefits offered by VMI are negligible under the problem settings where the supplier's order issuing efficiency is low and the production setup serves solely a single replenishment under IS.
doi:10.1016/j.omega.2014.09.004 fatcat:lcipokz34bgj7nljultlfvbju4