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Research Note--Revisiting "Retailer- vs. Vendor-Managed Inventory and Brand Competition"

Author

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  • Hag-Soo Kim

    (Department of Business Administration, Gyeongsang National University, Jinju 660-701, Korea)

Abstract

In a recent paper, Mishra and Raghunathan (Mishra, B. K., S. Raghunathan. 2004. Retailer- vs. vendor-managed inventory and brand competition. Management Sci. 50(4) 445-457) claimed that retailers prefer vendor-managed inventory (VMI) because it restores competition among manufacturers and encourages them to maintain a higher stock of their own brand under VMI than would be maintained under retailer-managed inventory (RMI). This paper shows that these results do not hold in general: each manufacturer's stocking level may be higher under RMI than under VMI and the retailer may lose by adopting VMI depending on the profit margin of the retailer relative to that of the manufacturers, the magnitude of the holding costs, and the intensity of brand competition. Numerical examples show that the effect of brand competition on the system is not so significant and the transfer of holding cost to the vendor is the key incentive for the retailer's adoption of VMI.

Suggested Citation

  • Hag-Soo Kim, 2008. "Research Note--Revisiting "Retailer- vs. Vendor-Managed Inventory and Brand Competition"," Management Science, INFORMS, vol. 54(3), pages 623-626, March.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:3:p:623-626
    DOI: 10.1287/mnsc.1070.0811
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    Cited by:

    1. Lu, Xin & Shang, Jennifer & Wu, Shin-yi & Hegde, Gajanan G. & Vargas, Luis & Zhao, Daozhi, 2015. "Impacts of supplier hubris on inventory decisions and green manufacturing endeavors," European Journal of Operational Research, Elsevier, vol. 245(1), pages 121-132.
    2. Guan, Ruoxi & Zhao, Xiaobo, 2010. "On contracts for VMI program with continuous review (r, Q) policy," European Journal of Operational Research, Elsevier, vol. 207(2), pages 656-667, December.

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