On Competence of Vendor Managed Inventory in Supply Chains Using Basic Mathematical Inventory Models

Authors

1 Department of Industrial Engineering, Islamic Azad University, Masjed Soleyman Branch, Masjed Soleyman, Iran

2 Department of Industrial Engineering, Sharif University of Technology, Tehran, Iran

Abstract

In this study a two-echelon single-vendor supply chain is selected to do a cost-based comparison between short-term performances of vendor managed inventory (VMI) and retailer managed inventory (RMI) while the inventory cost includes ordering and storing expenses; rate of consumption and price of good are constant; rate of production and pace of transportation are infinite and shortage is not allowed. The paper after a comprehensive literature review is followed by three cases of single retailer, -retailer and two-retailer chains. Unlike the second case, in the first case, VMI shows an absolute superiority to RMI and this is the reason of devising the third case in which a deeper analysis, including a typical performance assessment system for two-retailer chains, is done. The third case reveals that although VMI is not always the better choice but in most of conditions it can be chosen as the better approach

Keywords