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Multiple-vendor, multiple-retailer based vendor-managed inventory

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Listed:
  • Xianpei Hong
  • Wang Chunyuan
  • Lei Xu
  • Ali Diabat

Abstract

Vendor-managed inventory is a coordinated system where a vendor decides about the retailer’s replenishment quantity and time. This work studies a two-echelon distribution work composed of multiple vendors and retailers in traditional and vendor-managed inventory systems where unsatisfied demands are lost sales. We also consider that the retailers’ demand is stochastic following a uniform distribution. The mathematical models are developed and applied in vendor-managed inventory and traditional systems. Under the traditional supply chain, the vendor incurs the cost of holding and production setup, while a retailer incurs expenses for inventory holding, ordering, transportation and lost sales. In a vendor-managed inventory system, as the vendor is responsible for his retailers, the retailer’s costs are transferred to the vendor. We aim to identify benefits of vendor-managed inventory. The total cost per unit time is used as a comparable measure between vendor-managed inventory and traditional systems. Numerical examples and a sensitivity analysis of key parameters include the vendor’s setup cost and holding cost; the retailer’s transportation and ordering costs are presented in both vendor-managed inventory and traditional systems. The results illustrate that vendor-managed inventory total system inventory cost is lower than a traditional system where shortage is allowed. Copyright Springer Science+Business Media New York 2016

Suggested Citation

  • Xianpei Hong & Wang Chunyuan & Lei Xu & Ali Diabat, 2016. "Multiple-vendor, multiple-retailer based vendor-managed inventory," Annals of Operations Research, Springer, vol. 238(1), pages 277-297, March.
  • Handle: RePEc:spr:annopr:v:238:y:2016:i:1:p:277-297:10.1007/s10479-015-2040-0
    DOI: 10.1007/s10479-015-2040-0
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    References listed on IDEAS

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