The Benefit of VMI in a One-supplier-and-multi-retailers Supply Chain with Correlated Demands

摘要

Vendor-managed inventory (VMI) is a supply chain initiative where the supplier is authorized to manage inventories at retailers. The purpose of this paper is to study the benefit of VMI in a more comprehensive way. We consider a two-echelon supply chain model with one supplier, several retailers and negative correlated demands. The optimal inventory and replenishment policies in both traditional and VMI environment are analyzed, the performance under these two different settings are compared. Based on numerical studies, we identify the main driver of the supply chain cost reduction, and parameter settings under which VMI is most beneficial.