Vendor managed inventory with fixed shipping cost allocation

Author
Son, Joong Y.
Ghosh, Subhadip
Faculty Advisor
Date
2019
Keywords
vendor-managed inventory , VMI , locally-managed inventory , LMI , collaborative replenishment , incentives
Abstract (summary)
This paper examines the effectiveness of a vendor-managed inventory (VMI) system in a decentralised supply chain. Specifically, a two-tier supply chain with one vendor and multiple buyers is analysed under two replenishment models – an LMI system and a VMI system with vendor coordination that includes retailer incentives and cross-docking at the vendor. The impact of supply chain design parameters (number of retailers and retailer heterogeneity), and a policy parameter (shipment frequency) on the effectiveness of the VMI system is studied. Using an analytical model as well as numerical experiments, we find that incentive-aligned contractual arrangements can be made between the vendor and the retailers through reallocation of fixed shipping cost savings arising from VMI.
Publication Information
Joong Y. Son & Subhadip Ghosh (2019) Vendor managed inventory with fixed shipping cost allocation, International Journal of Logistics Research and Applications (Impact factor 2.828).
DOI
Notes
Item Type
Article
Language
English
Rights
All Rights Reserved