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

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

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.

Suggested Citation

  • Mohd Kamarul Irwan Abdul Rahim & El-Houssaine Aghezzaf & Veronique Limère & Birger Raa, 2016. "Analysing the effectiveness of vendor-managed inventory in a single-warehouse, multiple-retailer system," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(8), pages 1953-1965, June.
    • Handle: RePEc:taf:tsysxx:v:47:y:2016:i:8:p:1953-1965
    DOI: 10.1080/00207721.2014.965771
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