IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v46y2000i2p217-232.html
   My bibliography  Save this article

Stock Replenishment and Shipment Scheduling for Vendor-Managed Inventory Systems

Author

Listed:
  • Sila Çetinkaya

    (Industrial Engineering Department, Texas A...M University, College Station, Texas 77843-3131)

  • Chung-Yee Lee

    (Industrial Engineering Department, Texas A...M University, College Station, Texas 77843-3131)

Abstract

Vendor-managed inventory (VMI) is a supply-chain initiative where the supplier is authorized to manage inventories of agreed-upon stock-keeping units at retail locations. The benefits of VMI are well recognized by successful retail businesses such as Wal-Mart. In VMI, distortion of demand information (known as bullwhip effect) transferred from the downstream supply-chain member (e.g., retailer) to the upstream member (e.g., supplier) is minimized, stockout situations are less frequent, and inventory-carrying costs are reduced. Furthermore, a VMI supplier has the liberty of controlling the downstream resupply decisions rather than filling orders as they are placed. Thus, the approach offers a framework for synchronizing inventory and transportation decisions. In this paper, we present an analytical model for coordinating inventory and transportation decisions in VMI systems. Although the coordination of inventory and transportation has been addressed in the literature, our particular problem has not been explored previously. Specifically, we consider a vendor realizing a sequence of random demands from a group of retailers located in a given geographical region. Ideally, these demands should be shipped immediately. However, the vendor has the autonomy of holding small orders until an agreeable dispatch time with the expectation that an economical consolidated dispatch quantity accumulates. As a result, the actual inventory requirements at the vendor are partly dictated by the parameters of the shipment-release policy in use. We compute the optimum replenishment quantity and dispatch frequency simultaneously. We develop a renewaltheoretic model for the case of Poisson demands, and present analytical results.

Suggested Citation

  • Sila Çetinkaya & Chung-Yee Lee, 2000. "Stock Replenishment and Shipment Scheduling for Vendor-Managed Inventory Systems," Management Science, INFORMS, vol. 46(2), pages 217-232, February.
  • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:2:p:217-232
    DOI: 10.1287/mnsc.46.2.217.11923
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.46.2.217.11923
    Download Restriction: no

    File URL: https://libkey.io/10.1287/mnsc.46.2.217.11923?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Douglas A. Popken, 1994. "An Algorithm for the Multiattribute, Multicommodity Flow Problem with Freight Consolidation and Inventory Costs," Operations Research, INFORMS, vol. 42(2), pages 274-286, April.
    2. Van Eijs, M. J. G., 1994. "Multi-item inventory systems with joint ordering and transportation decisions," International Journal of Production Economics, Elsevier, vol. 35(1-3), pages 285-292, June.
    3. Bourland, Karla E. & Powell, Stephen G. & Pyke, David F., 1996. "Exploiting timely demand information to reduce inventories," European Journal of Operational Research, Elsevier, vol. 92(2), pages 239-253, July.
    4. Mordechai Henig & Yigal Gerchak & Ricardo Ernst & David F. Pyke, 1997. "An Inventory Model Embedded in Designing a Supply Contract," Management Science, INFORMS, vol. 43(2), pages 184-189, February.
    5. Alan S. Minkoff, 1993. "A Markov Decision Model and Decomposition Heuristic for Dynamic Vehicle Dispatching," Operations Research, INFORMS, vol. 41(1), pages 77-90, February.
    6. Shaler Stidham, 1977. "Cost Models for Stochastic Clearing Systems," Operations Research, INFORMS, vol. 25(1), pages 100-127, February.
    7. James K. Higginson & James H. Bookbinder, 1995. "Markovian Decision Processes in Shipment Consolidation," Transportation Science, INFORMS, vol. 29(3), pages 242-255, August.
    8. Lawrence D. Burns & Randolph W. Hall & Dennis E. Blumenfeld & Carlos F. Daganzo, 1985. "Distribution Strategies that Minimize Transportation and Inventory Costs," Operations Research, INFORMS, vol. 33(3), pages 469-490, June.
    9. Warren B. Powell, 1985. "Analysis of Vehicle Holding and Cancellation Strategies in Bulk Arrival, Bulk Service Queues," Transportation Science, INFORMS, vol. 19(4), pages 352-377, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Çetinkaya, SIla & Bookbinder, James H., 2003. "Stochastic models for the dispatch of consolidated shipments," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 747-768, September.
    2. Chung-Yee Lee & Sila Çetinkaya & Wikrom Jaruphongsa, 2003. "A Dynamic Model for Inventory Lot Sizing and Outbound Shipment Scheduling at a Third-Party Warehouse," Operations Research, INFORMS, vol. 51(5), pages 735-747, October.
    3. Sıla Çetinkaya & Chung‐Yee Lee, 2002. "Optimal outbound dispatch policies: Modeling inventory and cargo capacity," Naval Research Logistics (NRL), John Wiley & Sons, vol. 49(6), pages 531-556, September.
    4. Chen, Jing & Dong, Ming & Xu, Lei, 2018. "A perishable product shipment consolidation model considering freshness-keeping effort," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 56-86.
    5. Qi‐Ming He & James H. Bookbinder & Qishu Cai, 2020. "Optimal policies for stochastic clearing systems with time‐dependent delay penalties," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(7), pages 487-502, October.
    6. Anton J. Kleywegt & Jason D. Papastavrou, 1998. "Acceptance and Dispatching Policies for a Distribution Problem," Transportation Science, INFORMS, vol. 32(2), pages 127-141, May.
    7. Wei, Bo & Çetinkaya, Sıla & Cline, Daren B.H., 2023. "Inbound replenishment and outbound dispatch decisions under hybrid shipment consolidation policies: An analytical model and comparison," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    8. Anton J. Kleywegt & Vijay S. Nori & Martin W. P. Savelsbergh, 2002. "The Stochastic Inventory Routing Problem with Direct Deliveries," Transportation Science, INFORMS, vol. 36(1), pages 94-118, February.
    9. Anantaram Balakrishnan & Joseph Geunes & Michael S. Pangburn, 2004. "Coordinating Supply Chains by Controlling Upstream Variability Propagation," Manufacturing & Service Operations Management, INFORMS, vol. 6(2), pages 163-183, July.
    10. Leandro C. Coelho & Jean-François Cordeau & Gilbert Laporte, 2014. "Thirty Years of Inventory Routing," Transportation Science, INFORMS, vol. 48(1), pages 1-19, February.
    11. Sonntag, Danja R. & Schrotenboer, Albert H. & Kiesmüller, Gudrun P., 2023. "Stochastic inventory routing with time-based shipment consolidation," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1186-1201.
    12. Hall, Randolph W. & Sabnani, Vikas C., 2002. "Control of vehicle dispatching on a cyclic route serving trucking terminals," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(3), pages 257-276, March.
    13. Erenguc, S. Selcuk & Simpson, N. C. & Vakharia, Asoo J., 1999. "Integrated production/distribution planning in supply chains: An invited review," European Journal of Operational Research, Elsevier, vol. 115(2), pages 219-236, June.
    14. Anton J. Kleywegt & Vijay S. Nori & Martin W. P. Savelsbergh, 2004. "Dynamic Programming Approximations for a Stochastic Inventory Routing Problem," Transportation Science, INFORMS, vol. 38(1), pages 42-70, February.
    15. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, vol. 94(1), pages 1-15, October.
    16. Jana Ralfs & Gudrun P. Kiesmüller, 2022. "Inventory management with advance demand information and flexible shipment consolidation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(4), pages 1009-1044, December.
    17. Oded Berman & Qian Wang, 2006. "Inbound Logistic Planning: Minimizing Transportation and Inventory Cost," Transportation Science, INFORMS, vol. 40(3), pages 287-299, August.
    18. Baita, Flavio & Ukovich, Walter & Pesenti, Raffaele & Favaretto, Daniela, 1998. "Dynamic routing-and-inventory problems: a review," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(8), pages 585-598, November.
    19. Artalejo, J. R., 2000. "G-networks: A versatile approach for work removal in queueing networks," European Journal of Operational Research, Elsevier, vol. 126(2), pages 233-249, October.
    20. Liberopoulos, George, 2008. "On the tradeoff between optimal order-base-stock levels and demand lead-times," European Journal of Operational Research, Elsevier, vol. 190(1), pages 136-155, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:2:p:217-232. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.